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FILE COPY Report No. AF- la

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

THE ECONOMY

OF TUNISIA

August 31, 1962

Department of OperationsAfrica

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TABLE OF CONTENTS

Page No.

MAP OF TUNISIA

BASIC DATA

SUNVYAY AND CONCLUSIONS . . . . . . . . . . . . .i

I. INTFODUCTIO . . . . . . . . . . . . . . . . . .1

(a) The Country . . . . . . . . . . . . . . . .1

(b) Population .................(c) The Economy. 2

IT. THE PPOTECTOPATS . . . . . . . . . . . . . . . . 4

III. INDEPENDENCE . . . . . . . . . . . . . . . . . . 4

IV. PESOUFCES ADND PPODUCTION . . . . . . . . . . . . 6

(a) Recent Economic Growth . . . . . . . . . . . 6

(b) Principal Economic Sectors . . . . . . . . . 7

(i) Agriculture . . . . . . . . . . . . . . 7

(ii) Mining, Industry and Power . . . . . . 9

(iii) Transport . . . . . . . . . . . . . . . 12

V. IMTERNAL FII1ANCE . . . . . . . . . . . . . . . 13

(a) Public Finance . . . . . . . . . . . . . . . 13

(b) MIoney and Credit . . . . . . . . . . . . . . 15

VI. FOpEPGN TRADE AND PAYYEITS .17

VII. PPOSQPECTS FOP ECON1OMIC DEVELOPME,T . . . . . . 20

VIII. CFEDITWOPTHINESS . . . . . . . . . . . . . . . . 24

STATISTICAL APPENDIX

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Basic Data

Area: 48.,000 square miles

Population: (in thonisands) 1961: Tunisians 3,900Other IM4oslems 150Europeans 80

Total: 1t130

Gross Domestic Product

1960: 290 million dinarsInvestment 16% of G.D.P.,

Public Finance1961

(millions of dinars)

Ordinary Expenditures 5s.9Ordinary Revenues 63.6Equipment Expenditures 26.5

External Trade31961

(millions of dinars)

Imports 88.L4Exports 46.5

of whichPhosphates 9.9Iron Ore 3.0Cereals 1.6Olive Oil 9.6Nine 7.8

Foreign Exchange Reserves

End of December 1961 - U.S. $76.2 million equivalent

SUPIWARY AND CONCLUSIONS

1. Since independence in 1956 Tunisia has shown considerableability to manage its affairs and the transition from a French pro-tectorate to a wholly Tunisian administration has on the whole beenhandled well. The country has now a stable, essentially single party,regime built around the dominant personality and great personalprestige of President Bourguiba. The emergence of Algeria as anindependent nation must be viewed as a new factor likely to influenceTunisia's political and economic fortunes, including her relationswith France, significantly. An independent Algeria following amoderate course appears to be a necessary condition for soundeconomic development in Tunisia.

2. Tunisia is not a rich country. The econonr has remainedpredominantly agricultural with 70% of the population of about L millionliving from the land. Mineral exports, particularly phosphates andiron ore, are of some importance. Industry is still small and consistslargely of food processing, textiles and building materials. Exportsconsist of a rather narrow range of primary products, largely sold inthe French market, where they continue to benefit from a preferentialposition. Ilany industrial goods, fuel and in most years also some ofthe basic foodstuffs have to be imported.

3. Post-war economic growth has been moderate despite sub-stantial public investment in basic services during the early post-waryears. But private investment remained small and Tunisia never shared,therefore, to any significant extent in the post-war boom that was somarked in Algeria and Morocco. Except during the exceptionally goodharvest years from 1957 to 1959, the economy has stagnated since beforeindependence, and while some stimulus has been provided by publicinvestment, annual rates of growth in output have remainedunspectacular.

L. The Government is determined to achieve accelerated economicgrowth. Although an average rate of increase in real output of 60 ayear, maintained by the Government for the 1962-71 period as a targetfor planning purposes, would not be excessive in view of present lowincome levels and a population growing by more than 2% annually, itmust appear ambitious in the light of purely physical factors or of the lo;level of domestic savings.

5. Economic development will require primarily a raising of thegeneral level of skills and competence among the population to learn howto make the most of a rather poor natural environment. In agriculture,the greatest benefits will be necessarily long run, through soil andwater conservation to arrest and eventually to reverse deterioration ofthe land. Natural conditions are generallr favorable for olives,citrus, stone fruits and garden vegetables. Unless oil is discovered,for which there is some prospect, the mining sector will offer onlylimited possibilities. There is scope for light manufacturing of

ii -

consumer goods which now have to be imported and the transformation ofraw material exports to the semi-finished stage. Exports are likely to

grow only slowly even if present preferences in the French market are

maintained.

6. There exists a complicated French-Tunisian financial disputewhich affects among other things service on protectorate and post independencedebt to France. A settlement is likely to be reached in the context of a

general political agreement between the two countries, including agreement on

Bizerte.

7. Apart from debts to France, public external debt is limited to a

series of U.S. government loans, nearly all of which have a. local currency

option. In view of the moderate amount of U.S. debt and the likelihood that

France will settle her financial dispute on terms that will not impose a

serious burden, there would appear to be some scope for BEnk lending. But

Tunisia would be unwise to exhaust all at once her limited capacity to carry

debt on conventional terms. Moreover present income levels and prospects for

economic growth argue in favor of some financing on IDA terms.

THu E~0N Y -¢ JOF T2JIUIIA

I. DITRODTXTION

(a) The Country

1. Tunisia is essentially a Mediterranean country: the influence

of Africa proper, although noticeable, has been only incidental in its

history. ")hi2e union of the Mahgreb exerts a powerful emotional and

political appeal, Tunisia is unique in North Africa in the extent of

her association with Mediterranean history, culture and tradition, of

-which the remains of Punic Carthage and of the many once prosperous

Roman settlements, the holy city of Kairouan founded by the 7th

century .Arab invaders, Turkish forts, modern Tunis and the larger

coastal towns of the French protectorate bear continuing witness.

Successive invasions and occupations have left the population an

amalgam of Mediterraniean Europe and the Middle East with some infusion

of Black Africa. Berber dialects of the original stock have almost

disappeared and the people are now Arabic speaking with a widespread

knowledge of French.

2. With an area of about h8,000 square miles, of which only

one-third is fertile, and a population of about L million, Tunisia isthe smallest and the poorest in natural resources of the th.ree North

African countries. Two ranges of the Atlas mountains run north-east

from the Algerian border to the sea at Cap Bon and divide the country

into unequal and very different parts. In the north the climate is

predominantly Mediterranean and rainfall is generally adequate, with

LOO mm or more a year, Immediately south of the mountains and in the

coastal area from Sousse to the Gulf of Gabes and the Island of Djerba,

the climate is less favorable, but still suitable for settled agriculture

Over the remaining two-thirds of the country, where rainfall is low and

erratic, sheep, goats and esparto grass offer a meager and uncertain

livelihood4 South of Oabes, the country shades into the parched

monotony of the sub-saharan plains, broken only by occasional oases,

and beyond the Chott Ojerid salt flats into the Sahara proper.

(b) Population

3. The population is concentrated in the relatively fertile

North and East. Tunis and its suburbs alone have 700,000 inhabitants,

whereas in wide areas of the Center and the South there are as few as

2 inhabitants a square mile. Tunisian Noslems account for about 95%

of the total population and are increasing at a net annual rate of

over 2%. The death rate is declining, but birth rates have remained

high and the Government is trying to introduce birth control measures.

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I. The Jewish community dates back to Roman times, with a laterinflux from Spain and Italy. Over the last decade, about 50,000 Jewshave gonie to Israel and France, but O,000 still remain. Europeanimmigration took place mainly in the thirty or forty years before 1930,when there were already 200,000. Tunisia experienced little of thepostwar wave of French immigration that was so noticeable in Algeriaand Morocco and there has been a very sharp decline from the 250,000on the eve of independence six years ago, to perhaps 80,000 now. Ofthese 50,000 are French, including Italians and Maltese of Frenchnationality, and the rest are mainly Italian.

5. Initially the outflow consisted principally of Europeans inthe administration and public services who have been replaced almostcompletely by Tunisians. War in Algeria, better employment opportunitiesin France and Italy combined lfith the professed intentions of the TunisianGovernment to encourage the progressive replacement of skilledforeigners by Tunisians, have meant that professional people, managerialstaff, technicians, skilled industrial and office rorkcers, Europeansas well as Tunisian Jews, are leaving the country at a rate whichthreatens to frustrate efforts for more rapid development. The Govern-ment is aware of the importance of slowing down the outflow, and it isactively encouraging a reverse flow of technical advisers and skilledpersonnel from France and other countries prepared to stay on acontractual basis. Settlers in the strict sense did not number more thanabout 3,000 families. Some, whose land has been taken over, have alreadyleft and the numbers will dwindle over the next few years, as farmlandowned by Europeans is transferred progressively into Tunisian ownership.

(c) The Economy

6. The weaknesses of the Tunisian economy, in many respects notunlike those of southern Italy, are easier to detect than the naturaladvantages which might lend some foundation for future development.A rapidly increasing but largely unskilled population, pressing againstlimited, essentially agricultural resources, has meant widespreadunder- and unemployment. Farming methods are generally primitive andyields are low. As elsewhere in North Africa, erosion and soildeterioration have been severe. Agricultural potential is in any caselimited by low and erratic rainfall over most of the country.Irrigation possibilities are few and even where water is available inquantity, salinity is often a problem. Known mineral resources arelimited to low-grade phosphate rock, relatively small deposits of ironore and a few lead and zinc mines. Hydro power potential is small andthe country is heavily dependent on imported fuel. Manufacturingindustries are handicapped by a small local market and by competitionfrom French suppliers, who continue to receive import preference undera reciprocal tariff agreement with France.

7. There is, however, some potential for more rapid growth thanin the past and for building up a more diversified and prosperous

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economy. Tunisia has able and dedicated top civil servants andadministrators. The country is generally well equipped with basic

services. There is an extensive network of good roads, railways and

ports and some equipment for irrigated agriculture is in place. TheFrench implanted a number of modern industries during the Protectorateas well as a modern agriculture in which the Tunisians participateincreasingly. There are some possibilities for large-scale industrialoperations based on local raw materials. Oil and natural gas, for

which exploration is going on, may be found (the southern part of theboundary with Algeria has never been demarcated). Natural conditions

are generally favorable for olives, citrus, stone fruits and gardenvegetables, for most of which Tunisia has a seasonal advantage over

other I'iediterranean producers. The attractions for tourism areunquestionable. With the rapid growth of other Mediterranean countriesand markets, Tunisia is likely to benefit from her central position.Economic union with Algeria and Morocco could offer new opportunities.

8. To make the most of the rather poor natural environment willrequire, first and foremost, raising the general level of skill and

competence. Tunisia is fortunate in the importance that her well-educated and able leaders attach to the human element in economicdevelopment and in the strong popular support for education.

9. Economic planning, with the accent on the promotion of the

individual, was part of the program of the Neo-Destour, the predominant

political party, well before independence in 1956 and is now regarded

by the Government as a tool essential to formulating economic policies

for accelerated growth. A few years ago, individual government

departments started to prepare projects to be executed over a ten-year

period and already in 1958 a reform of the educational system and a

ten-year educational development program, aiming at universal primary

education and expanded secondary education were launched. Early in1961 planning functions were centralized in a new Minister for Planningand Finance who is opposed to economic conservatism and financialorthodoxy to the extent that they may frustrate rapid development.

10. The Government has published a ten-year development

"perspectives" for 1962-71 and a more specific "pre-plan" for the years1962-6h was approved by Parliament in June 1962. The plans are

admittedly optimistic in the assumptions about the rate of growth to be

achieved and the financial resources likely to be available. Planningis still hampered by many unknowns, notably the outcome of the Algerian

situation, and the statistical framework is shaky. However, both the

perspectives and the pre-plan have already served the useful purposeof devising a strategy of development for Tunisia, setting broadpriorities and making clear to everybody concerned, within the admini-stration and outside, the extent to which sacrifices are needed to endunemployment and raise average incomes above mere subsistence.

- Li. -

II. THE PROTECTORATE

11. French influence in Tunisia began in the 1B30's, after theoccupation of neighboring Algeria and the collapse of effective Turkishrule. In 1881, the country became a French protectorate as a result ofinterruptions in debt service, insecurity on the Algerian border and thethreat of Italian intervention. The Treaty of Bardo gave nominalsovereignty to the Bey of Timis but effective control to the Frenchresident-general. The French carried out a thorough reform of theadministration and well before World War I brought in French farmersto settle on the best land in the North, laid out the railway networkand started road and port construction. French enterprises minedphosphates, iron and lead ores and began industrial manufacturing andprocessing on a small scale. Commerce and banking were largely inFrench hands and the modern economy, built around European farming andmining, was intimately linked to France on which it depended for capital,technical skill and markets.

12. After the Second World War, when Tunisia was a battleground,the French launched their "Plals de Vi4derr.n .- sation rt, dT oifipement'1 ,largely financed by low interest loans to tthe Protccto:ate Government.Between 19h8 and 1957 close to $300 million equivalent was spent onreconstruction, expansion and modernization of transport, power, agri-culture and social investment. Agriculture alone, lincluding theiNedjerda valley irrigation scheme and various smaller i-rrigation andreclamation projects, absorbed over one-third of total public investmentduring the period.

13. Private investment, however, remained relatively modest andbegan to decline as early as 1950. French private capital saw feweropportunities and greater risks than in Algeria and Morocco, sinceTunisia was generally expected to become independent at an early date.While the development effort favored private investment in power andtransport, encouraged public works contractors and led to the construc-tion of cement and superphosphate factories, new industrial creationswere few and private investment in agriculture remained small.Consequently, despite considerable public investment, Tunisia nevershared to any significant extent in the postwar boom that was so markedin Algeria and Mliorocco.

III. INDEPENDENCE

1i. Nationalist ideas began to spread among European-educated"young Tunisians"t well before 1920, when various groups united to formthe Destour, or Constitution, Party. Its leadership was supplanted inthe early 1930ts by the more aggressive Neo-Destour Party with HabibBourguiba as one of its leaders. Suppressed by the French, the partyresumed its political activity after the war. While more radical

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leaders demanded immediate independence, Bourguiba adoptec agradualist policy. Tunisians were given wider representation in theProtectorate Government and some progress was made in education. Butland settlement plans for Tunisians failed and the controlling power ofthe French in the local and central administration hardly diminishied.The internal political situation deteriorated rapidly during the early1950's and violence broke out. Imprisonment of nationalist leaderswas ineffective. Pierre Miendes-France, then Prime Kinister of France,initiated negotiations which led to internal autonomy in 1955 andindependence in 1956. T4hen the republic was proclaimed in 1957,Bourguiba was designated as its provisional president. He was electedpresident in 1959 on the adoption of a constitution inspired by hisown belief in a strong presidential system.

15. Tunisia has now a stable, essentially single party regimebuilt around the dominant personality and great personal prestige ofPresident Bourguiiba and gererally inspired by the highly distinctivedoctrine of "Bourguibisme". The essence of "Bourguibisme"l is thesuperior virtue (or at least greater efficacy) of peaceful persuasionover force, the social and human purpose of economic development, theresponsibility of government for galvanizing the population and theimportance of reviewing continuously the successes and failures ofpast methods.

16. The propaganda arm of the government, and hence the exponentof Bourguibisme, is the Neo-Destour party, which is all-pervading andenjoys wqidespread support. There is no ban on other parties, but theappeal of the Neo-Destour is so well maintained, and its ideologicalspectrum so wide, that other parties find it hard to exist. Politicalopposition is thus largely contained within the party, where it can beseen, and influential opponents tend to find themselves placed in office.The Bizerte crisis created some division within the Neo-Destour party,but President Bourguiba's authority and popularity emerged apparentlyuntarnished.

17. Bizerte also demonstrated the fragility of political relationsbetween France and Tunisia and the importance of Algerian affairs on thepolicies of both countries. Wiat is equally notable, however, has b-eenthe ability of both governments, up to a point, to insulate financial,commercial, cultural, and, indeed, personal working relations from thegeneral political issues between them. From 1957 an increasinglycomplicated series of financial claims and counter-claims ("contentieux%)have developed (see paragraph 93). While the resumption of satisfactorydiplomatic relations that has just taken place should make possiblenegotiations on the various "contentieux" between thle two governments,a detailed settlement will inevitably need some time to be worked out.

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IV. RESOURCES AND PF,ODUCTION

(a) Recent Economic Growth

18. The Tunisian economy has remained predominantly agricultural;over 70% of the population live from agriculture, livestock andfisheries, which do not, however, contribute more than one-third of totaloutput in an average crop year. Mining, almost entirely for export,produces less than L% of national output, industry, mainly light manu-facturing and processing 10%, construction, transportation and utilities13% and commerce and banking 19%. Other services and government accountfor the remaining 22%.

19. Detailed national account data have been prepared only forthe year 1957. Data for earlier and later years are based in part onknown components and on rough estimates for the remainder. GrossDomestic Product at market prices is estimated roughly at dinars 270million for 1961, or an averaFe of dinars 63 per capita, equivalent tot152 at the current exchange rate. There are wide variations in percapita output and incomes between those in traditional agriculture inthe less favored areas and miners, skilled workers and farmers in therelatively fertile North. A recent study indicated that nearly 60% ofthe total population have to live on a per capita annual income of lessthan dinars 30, and only about 12% have an annual income of dinars 100or more.

20. Living standards are low, but evidence of progress is to befound in the improvement of education, nutritional and health standards,in better housing and the wider distribution of consumer goods in thesmaller towns and villages. Half of the school-age children are now inprimary schools as compared to one-third five years ago, and in thecities primary education is already almost complete. The number ofchildren entering secondary schools represents about one-third ofchildren leaving primary schools. Literacy among adults, although stil.only 25", is increasing. Debilitating illnesses, such as trachoma,have all but been eliminated. The caloric intake of the population isgenerally satisfactory despite very low incomes in the traditionaleconomy and in normal years malnutrition is not a problem.

21. There is evidence to suggest that real output has increasedlittle if any faster than population over the last 30 to 35 years, whatimprovement there has been having occurred since 1945. Despite sub-stantial investment in the earlier postwar period, at a rate representingan average of over 20% of gross domestic product in almost every yearuntil about 1952, the rate of growth was only moderate. The reasonappears to be that much of the investment went into slow-yieldingagricultural projects, social and basic services in the public sector,whereas private investment in productive sectors in no year accountedfor more than one-quarter of total gross investment. With the approach

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of independence public investment declined, much of the industrialcapacity created earlier was under-utilized and repatr:Lation of Frenchprivate capital increased. If the average rate of grouth from 19L6to 1952 was of the order of 3p' to h% a year, the economy was almoststatic up to the good harvests of 1958 and 1959. Thereafterindustrial and construction activity recovered owing in part to newprojects in the public sector - investment regained a rate of about15% of gross domestic product - but in 1961 agriculture sufferedagain losses because of drought, mining declined and G.D.P. afterhaving increased by 12% in 1960 according to official national accountestimates, dropped in 1961 close to the level attained in 1i58.

22. WTith over 25,000 persons, not counting women., entering thelabor market every year and inadequate economic growth, unemploymenthas been a major preoccupation of the Government. Until recentlyabout 1300,000 persons, or nearly one-fourth of the total labor force,were estimated to be partially or wnolly unemployed. Impsloyment inagriculture is intermittent - since cereals and olives, the principalcrops, require little attention for much of the year - and many urbanworkers are able to find, at best, only occasional employment.

23. To alleviate unemployment, the government launched a large-scale w^ork relief program in 1958 with about 25,000 unemployed workers.The program now employs almost 200,000 workers on making rural roads,terracing hillsides, planting trees and doing other improvement workaround the countryside which can be done with simple tools and a minimumof skills. The program is administered by the provincial governors wJithgreat energy and considerable ingenuity. The returns may be debatablein some cases but employment of sorts has replaced unemployment relief,the movement of surplus farm population to the towns has been haltedand a sense of purpose has been induced. The workers are paid partlyin kind out of U.S. surplus food deliveries and partly in cash by theTunisian Government.

(b) Principal Economic Sectors

(i) Agriculture

24. As elsewhere in North Africa, water is the main determinant ofagricultural production. Rainfall is adequate only in the area north ofthe Atlas mountains, and even there variations from year to year both intiming and amount can be wide. In the Sahel, which comprises most of theeastern coastal belt, low rainfall is compensated to some extent by thehigh moisture content of the air.

25. Cereals account on the average for about 30% of agriculturalproduction, olive oil and wine for 25% ard livestock for another 25%.In a normal crop year Tunisia produces enough cereals to have an exportsurplus of hard wheat, but has usually to import some soft wheat for

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bread for which local demand is increasing. In a poor year such as 1961,the harvest may be reduced by half and Tunisia has to irmport also hard

wheat and barley. Internal support prices are established for all

cereals and exports of cereals and wine continue to benefit from high

prices obtained in the French market. Olive production, for whichclimatic conditions are particularly favorable, is almost entirely in

Tunisian hands. Olive groves are being replanted and expanded and

there is a substantial export surplus. The planting of citrus, other

fruit trees, tomatoes, artichokes, and winter vegetables, of which

local consumption is increasing and for which Tunisia has moreover a

seasonal advantage over other Mediterranean producers, has expanded.

Cotton has been planted successfully on irrigated land and experimental

planting of sugar beet has given satisfactory results. Dates, including

the highly valued Degla Ennour variety, are grown in the oases.

26. Although an increasing number of Tunisians have become

successful olive-citrus-vegetable and tobacco growers, or cereal farmers,

using modern methods, the majority still practice subsistence agriculture,

sowing the land without preparation, making little use of crop rotation,

improved seeds, fertilizers or insecticides. Livestock is undernourished

and often poor in health, and pastures are overgrazed. Inefficient

practices, the hazards of climate and limited irrigation have meant

that agricultural production has increased barely enough to keep pace with

the needs for a rising population over the past 20 to 25 years.

27. Much of the land devoted to wheat and barley, perhaps 3 million

of the L million hectares classified as arable, has to be fallowedevery other year. Through centuries of neglect and bad practiceforests, natural pastures and other vegetation has disappeared or

deteriorated; modern Tunisia supports only half to two-thirds of the

population of Roman "Africa,'. A major effort is being directed towardswater and soil conservation, and reaforestation, much of it carriedout, with considerable local initiative, under the Government's workrelief program.

28. Surface and underground water resources available forirrigated agriculture are relatively limited. It is estimated thatwater is available, at a price, for irrigating about 250,000 hectares,of which only a part could be irrigated the year round. The largest

single area of fully irrigated land will become available in the lower

Medjerda valley which has been equipped to irrigate 30,000 hectares andwhere draining and reclaiming another L0,000 hectares are near comple-tion. Only a small part of this area is at present actually irrigated

and the economics are somewhat dubious. One problem has been salination,

another the pattern of land holdings. Much of the area was owned in

large blocks by Frenchmen who have been naturally reluctant to developit in view of their uncertain future. Tunisian holdings by contrastwere fragmentary.

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29. Outside the Medjerda valley there Pre another ILO,000hectares already equipped or being equipped for irrigatitin; but thesecover generally only small areas. On Cap Bon, one of the best agri-cultural areas and one of the few where good water is available, along-term program for the rational utilization of water resourcesthrough irrigation, flood diversion and drainage works, is progressing.Most of the irrigated citrus is grown in this area. In the South andin the Center wells are being drilled, around which some irrigatedagriculture is developing. Niew irrigation and flood diversion schemesare in preparation.

30. Present government plans call for the terminatizg-of virtuallyall European farming. The reconversion of some of the Eu3 Vpan land-from wheat and wine to other uses may be of long-term benefat, but inthe short run is likely to be accompanied by a fall injrmtuction.Europeans originally owned about 600,000 hectares of $ .t promisingland, in 3,0CO individual holdings, and producing abo-t,rrsathird of thetotal value of agricultural production. About one fourth of this land,along the Algerian border and in the Medjerda valley, has already beentaken over by the Tunisian Government; the rest will be-turned over toTunisian ownership over the next few years under a French-Tunisianagreement of 1960 - compensation of owners being largely the responsi-bility of the French Governme-nt.

31. From an economic point of view the end of European farmingw ill be a loss and the government is corsequently moving as slowly as is

politically acceptable. Yields on many farmer European farms havealready dropped and absentee-ownership among the remaining Europeanfarmers has increased. It is doubtful how soon Tunisian farmers willbe able to acquire the expertise and technical and supervisory personnelcan be trained in sufficient numbers to take over European farmland,to change to more advanced land use methods generally and thus to takefull advantage of the additional capital investment envisaged under thegovernment's development plans.

(ii) I-ining, Industrry and Power

32. Production of phosphate rock, iron ore, and, on a much smallerscale, lead and zinc, was started by French companies before the FirstlWorld War. The mining industry furnishes between a quarter and a third

of all exports, half the railway and over two-thirds of the porttonnage, but is not in a strong position.

33. Tunisia has very large deposits of phosphates and up to the endof the 1920's was a leading exporter, shipping 3 million tons of 58prock a year. Reserves remain substantial, but with the developnent ofhigher grade deposits, particularly in the United States and Morocco,Tunisia's importance as a producer has declined to less than 70 ofworld production and production has remained stationary at about

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2 million tons a year, a volume that is barely remunerative. Bywashing, the shipping grade has been raised to 65%, aacut the minimumacceptable in international trade for phosphate rock as a simplefertilizer but too low for the rapidly expanding reqc.irements of themajor super-phosphate producers. Until the end of 19,60 low gradeTunisian - and Algerian - phosphates benefited from common marketingarrangement with Morocco. When Morocco left the "comptoir", and begancutting prices, the future of the Tunisian industry - which supportsperhaps 200,000 people in an area of the South with no other employment -

was seriously compromised. In order to meet the Moroccan sales drive,Tunisian and Algerian producers have joined in a new sales organizationwith companies in Togo and Senegal. The government has injected newcapital into the Sfax-Gafsa Phosphate Company, the largest phosphateproducer, of which it now owns 51%; it intends to reorganize the wholephosphate sector and to spend considerable amounts on plant modernizationand further upgrading of phosphate rock. The financial return will bemarginal, but the government considers the industry too important anemployer and exporter to be abandoned.

34. The other major mineral export is iron ore, about one milliontons a year. Proven reserves are down to about 15 years at this rateand development prospects are uncertain. Lead and zinc are mined insmall quantities at scattered mines, virtually all of which appear tobe marginal. A small amount of salt is produced.

35. The principal hope for mineral development is natural gas orpetroleum. A small gas field, which now supplies the city of Tunis, wasdiscovered a number of years ago on Cap Bon during prospecting for oilthat was later abandoned. However, recent discoveries in Libya and theSahara and the recognition of similar structures in Tunisia have revivedactive interest in the Center and South where one Franco-Tunisian andfour foreign companies have renewed drilling, with preliminary resultsthat are said to be encouraging. So far, however, Tunisia's income fromoil is limited to royalties and port dues from the pipeline from theEdjele fields to La Skhirra in the Gulf of Gabes.

36. Industry is confined to the processing of a few mining andagricultural products, the production of cement and other constructionmaterials and some light manufacturing. Capital and management havelargely come from France. The small local market, competition fromFrench suppliers, shortages of skilled labor, and the uncertain supplyof agricultural raw materials, appear to set limits to an expansion.Traditional handicrafts are important in textiles, rugs, clothing,shoes and other leather goods and ceramics.

37. Canning and food processing were stimulated by supplydifficulties during the war and the immediate postwar period both inFrance and in Tunisia. The building industry and construction materialsbenefited from the large public works program carried out in the latel940's and early 1950's. With recovery in Europe and the approach of

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independence, demand declined or was satisfied elsewhere and privatecapital and management began to withdraw.

38. While the government has shown an inclination to take acontrolling interest in French enterprises established under theProtectorate, its policy to attract new French and other foreignprivate investment with legislation authorizing transfer guaranteesto foreign capital, guarantees for loans, tax exemptions and rebates,long-term tax agreements, tariff protection and, if necessary,temporary prohibition of competing imports, has had some success. Anumber of new industrial ventures - in each case the government beingassociated with foreign investors - were in a stage of active prepa-ration a year ago, in the sense that detailed planning and engineeringhad been completed. Since then, however, foreign investors havebecome hesitant and some of these projects have been shelved, at leasttemporarily, mainly because of the unsettled political situation in theaftermath of Bizerte, and more particularly because of a "Tunisificationlaw" passed in August 1961. Although directed primarily against foreignfirms in the commercial sector, the law has cast doubt on the future offoreign private capital generally. The government has since decided togo ahead itself with an esparto pulp plant and a sugar refinery. Amongforeign investors, ENI, the Italian state-owned oil concern, is pro-ceeding with the building of an oil refinery in partnership with thegovernment. Forenader, a Swedish company, is planning to set up atriple superphosphate factory, total investment amounting to $1.1million equivalent, of which $3.5 million equivalent to be financedby I.F.C.

39. Government services are working on the reorganization ofindividual sectors and enterprises, on marketing and creation of pro-fessional organizations and are otherwise trying to encourageTunisian initiative and to promote entrepreneurial and industrial skills.The Societe Tunisienne de Banque (STB), a commercial bank set up in 1958with the government as a majority shareholder, provides equity and loan

capital for modernization and for new industrial enterprises and aseparate development bank,the Societe Nationale d'Investissement (SNI),in which the government together with the Central Bank are majorityshareholders, will start operating this year.

h0. The dearth of able managers, however, remains the most seriouslimitation for a more rapid development of the industrial sector.Tunisians are participating increasingly in new ventures. A number ofsmall plants have been set up with government encouragement fortextiles, shoes, car batteries, furniture, household wares and otherproducts, which are now largely imported. The government is also tryTinghard to bring some order and higher standards into traditional artisanproduction of clothing, leather work, ceramics and rugs. Some of this

must remain essentially handicraft activity, but it is already noticeablethat master artisans in the larger towns are beginning to acquire powermachines and to set up series production.

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L1. The electric power industry in Tunisia is still very small.The northeastern part of the country is served by an interconnectedsystem which accounts for about 90% of total power production. Thereare two interconnections to Algeria which have been out of use since1958. Installed capacity is about 110 TV, of which 94 FiM is inter-connected. Hydropower is limited to several small plants with aninstalled capacity of 27 INW; firm capacity is less. All fuel isimported.

42. Electric power production was in the hands of one semi-publicand nine private French companies until about four years ago, whentheir properties were taken over by the Tunisian Government; in 1962they were regrouped in a new, government power corporation, the SocieteTunisienne d'Electricite et du Gaz (STEG). In the years after 19L6,when extensive war damage had been repaired, energy production expandedunevenly at an average annual rate of over 10% a year to reach 220million kwh in 1955. Thereafter, the rate of growth was limited to theincrease in household consumption, but began to recover in 1960 whenindustrial demand expanded, to slow down again in 1961 when productionreached 280 million kwh, only 3% more than in 1960.

(iii) Transport

L3. Tunisia has well-developed railway and road networks. Thenorthern railway system is connected with the Algerian railways, andextends south to Sfax. It is operated by the Societe Nationale deChemins de Fer Tunisiens (SNCFT) and is now almost completely Tunisianstaffed ard managed. The system has been completely dieselized and itsfinancial position much improved. A second system in the South is ownedby the Sfax-Gafsa Phosphate Company and carries both mineral and generaltraffic. Railways transport a majority of inter-city passenger trafficand a still larger share of the country's freight traffic.

hh. Roads are excellent. There are nearly 16,000 km of main andsecondary roads of which over half are paved or hard-surfaced.Highways connect virtually all the principal cities and are well main-tained. They are more than adequate for present traffic and apart fromnew roads required to reduce congestion in and about the industrial andport area of Tunis, little new investment in roads will be required forsome years.

45. The four main ports handle about 5.5 million tons of traffica year, of which about 50% is moved through Tunis-La Goulette, L0%through Sfax, and the remainder through Bizerte and Sousse. The lastthree have considerable excess capacity. Shipment of oil through thenew port at the terminal of the Edjele-La Skhirra oil pipeline willexceed 10 million tons in 1962, compared with 6.5 million in 1961,when the operation of the pipeline was interrupted for three monthsafter Bizerte.

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V. INTERNAL FI1ANCE

(a) Public Finance

46. Ordinary expenditures and revenues of the Central Governmenthave risen by about one-third over the six years since independence, andthe proportion of gross domestic product absorbed by the government nowexceeds 20% compared with 16% in 1956. The rise in expenditurescontinued a trend, already apparent during the later years of theProtectorate, for ordinary expenditures of an economic and a socialnature to increase as the government tried to make up for dwindlingprivate initiative and expanded education and health services.Expendituires for education, for instance, now account for 23% of thetotal compared with less than 15% before independence. But defenseand other expenditures attributable to an independent state were helddown and salaries of Tunisians replacing outgoing French officials werecut drastically.

7. The government has continued to rely heavily on indirecttaxes which in 1961 accounted for 75% of total revenues compared withless than 70% in 1956. Indirect taxes consist of various levies onbusiness transactions, the sale of tobacco and gasoline, and importduties. Taxes on imports alone account for one-third of total governmentrevenues. By contrast, direct taxes are still relatively unimportantand as far as taxes on agricultural income are concerned, the system isstill archaic. So far the ordinary budget has shown a surplus everyyear, used for financing investment in the public sector.

48. The development since independence of the ordinary and equip-ment budgets is shown in the table below:

BUDGET

Actual EstimateZ1956/57 1957/58 1958/59 1959/60 1960 1961 1962

-__ _ _ _ ______ ______ 9 mos.*

in million dinarsOrdinary BudgetExpenditures 37.3 h4.6 L5.8 h6.7 4o.9 58.9 56.8Revenues hl.3 hh.2 46.7 50.0 h8.7 63.6 56.8

Surplus (+) orDeficit (-) +4.0 +0.1 +0.9 +3.3 +7.8 +h.7 -

Equipment BudgetExpenditures 9.4 11.6 13.9 20.3 17.9 26.5 13.0

* Beginning with 1961 the fiscal year started January 1, instead ofApril 1; the 1960 fiscal year covered therefore 9 months only.

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J9. While there was a comparatively smooth transition fromProtectorate to independent state so far as the ordinary budget wasconcerned, expenditures under the equipment budget showed a sharp dropimmediately after independence, particularly when French aid wassuspended in 1957, and rose only slowiy in the following two years owingto a shortage both of funds and of suitable new projects. With Americanaid replacing French assistance and new projects, particularly for socialequipment, irrigation and small agricultural improvements, reaching thestage of execution, expenditures rose steeply from 1959 on to exceeddinars 25 million in 1961, which in real terms is about 10% higher thanthe average for the five years preceding independence. The appropria-tion of dinars 13 million under the 1962 budget is for old projects only.They have now been included in the appropriations voted by Parliament forthe three years of the pre-plan.

50. Expenditures under the equipment budget for the 1956-61 periodwere roughly distributed as follows: irrigation, land reclamation andagricultural extension - 5%0; social equipment - 25%; housing - 10%; andthe remaining 20% for transport, electric power, telecommunications,tourism and state participation in the share capital of existing or newlycreated enterprises.

51. Aside from ordinary budget surpluses, U.S. aid has been themain source of funds for financing the equipment budget - c-urrently aboutone-third of the total, largely in the form of counterpart funds generatedthrough the sale of agricultural surplus goods. The remainder is beingfinanced by the Treasury and the net proceeds of small annual issues of 2to 4 year equipment bonds subscribed by banks and insurance companies.

52. The importance of the public sector is only partly reflected inthe Central Government budget. In recent years there has been a sub-stantial increase in extrabudgetary expenditures, financed by some 30special funds administered directly by the Treasury and fed mainly bythe proceeds of new taxes specifically earmarked. All these flmds areapparently closely supervised by the Ministry of Planning and Financeand have sufficient earmarked income; some show a surplus. Most of themare fairly small; the largest is a Defense Fund created in 1959 to equipthe armed forces and financed by a special 10% surtax on most directtaxes. Other extrabudgetary funds have been set up to finance the recon-version of vineyards, rural electrification, improvement of housing andaid to orphans.

53. So far as can be determined, the cash position of the Treasurywas comfortable up to 1961, although it had to finance out of its ownresources about half of the cost of the work relief program institutedin 1958. These Treasury "resources" are the increases in net balances ofthe special funds and of various Treasury "correspondents", includinglocal authorities and public enterprises, increases in deposits with thepostal checking and national savings bank systems and the amounts setaside in the ordinary budget, but not transferred to France, for debtservice to French Government agencies.

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5b. With the total cost of the work relief program increasing froman estimated dinars 8 million in 1960 to almost dinars 21 million in1961, cash balances accumulated earlier having been drawn down andreceipt of taxes having been somewhat delayed in the months after Bizerte,the Treasury was forced for the first time to resort to Central Bankadvances towards the end of 1961, temporarily reaching dinars 2.4 million.

(b) Money and Credit

55. Political independence in 1956 did not immediately affect finar.-cial and monetary relations with France, with which Tunisia remained forall practical purposes in monetary union for another three years. Therewas no central bank, the commercial and savings banking system was simplyan extension of the French system and there were no restrictions on pay-ments. Although Tunisia did not follow all the changes in the Frenchexchange control system after 1955 and concluded bilateral trade andpayment agreements of her own with countries outside the franc area,effective separation from the French monetary and financial system datedonly from November 1958 with the creation of the Central Bank of Tunisiaand the introduction of a new currency, the dinar, equal to 1,000 formerTunisian francs. The decision of the Tunisian Government not to followthe French devaluation of December 1958 carried separation a stage furtherand led immediately afterwards to controls on transfer of capital to thefranc area. During the second half of 1959, Tunisia took completecontrol over her foreign exchange policy and her foreign exchangereserves. Under a new financial agreement with France she can stillpurchase non-franc exchange in the Paris foreign exchange market withincertain limits without being obliged in return to sell foreign exchangeearnings to the French Exchange Stabilization Fund.

56. Tunisia also extended its influence in commercial banking bysetting up, in 1958, the Societe Tunisienne de Banque (STB), which tookover the commercial banking activity of the former Banque de l'Algerieet de la Tunisie, and has rapidly become the most important commercialbank, with about h0%. of all bank deposits. The Banque NationaleAgricole, created the same year, specializes in crop and medium-termagricultural equipment loans. A bank extending credit to cooperativesstarted operating in 1961. The Tunisian branch of the French Caissed'Epargne was replaced by a National Savings Institute. Five importantbranches of foreign banks remain to share commercial banking with STB.

57. The policy of the new Central Bank has given high priority toprice stability and conserving foreign exchange reserves. It has con-sequently been open to criticism for not doing enough to stimulatedevelopment. To enforce its credit policy, the Central Bank has to relymainly on changes in rediscount rates and on quantitative and qualitativecontrols. Rediscount ceilings are established for each bank and short-term credits over a certain amount and all medium-term credits require theCentral Bankts prior authorization. Commercial banks are also encouragedto invest between 20% and 25% of their deposits in Government equipiae.nt,bonds. Central Bank advances to the goverrment are limited by its

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statutes to a maximum of 5% of annual budget revenues and are repayablewithin 240 days. In practice, the Central Bank has put a ceiling ofdinars 2.5 million on such advances, equal to 4% of 1961 revenues.

58. With economic and investment activity at a low level, monetarystability was in little danger until about 1960. Although the moneysupply increased very rapidly from 1958 on, it reflected to a large extentthe rise in foreign exchange reserves, which reached a peak of a littleover dinars h million in May 1960 compared with dinars 21.5 million atthe end of 1958. Credit to the economy rose only moderately except forseasonal peaks in the fall and early winter for cereals, wine and olives,while credit to the government remained fairly small. In these circum-stances, the expansion of the money supply was reflected mainly in a sub-stantial increase in deposits with the banking system. Prices, both freeand controlled, were under little pressure.

59. The monetary expansion continued in 1960 and 1961, with themoney supply increasing by 12% and 7% respectively. However, the strongexpansion of credit - to the economy for increased activity in manu-facturing, building and public works, for the import of machinery, spareparts and fuel and in 1961 to the government owing to the tight cashposition of the Treasury - was now the main reason for the continued rise,whereas foreigfn exchange reserves, after having remained fairly stable in1960 declined steeply in 1961 to dinars 32 million at the end of the year.Although the Treasury was able to repay the advances from the Central Bankbefore the end of 1961, the Central Bank has since made deposits in thepostal checking system where they are at the disposal of the Treasury.

60. The continued rise in the money supply is a reason forconcern: domestic production cannot respond quickly to a rise in demandand skilled manpower in most categories is already extremely scarce,whereas foreign exchange reserves are setting a sharp limit for importingliberally. The Central Bank is supervising closely the granting ofcredit to business by commercial banks and to defend foreign exchangereserves, which are down to about four months' import requirements, itis requiring advance deposits for importing almost all categories ofconsumer goods.

61. President Bourguiba felt compelled in a speech of March 1962 toappeal to the public for price discipline as essential for the success ofthe government's development efforts. Prices are increasing, but theirmovement is not reflected adequately in the wholesale and cost of livingindices, which include many prices already controlled and are based on aconsumption pattern which is no longer representative. Profit margins inretail sale are now controlled and changes in the retail price of mostbasic foodstuffs are subject to government approval. Prices of servicesand of all domestically produced goods except for agricultural productshad already been frozen in January 1959.

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VI. FOREIGN TRADE AM PAYMlvENTS

62. Tunisia is essentially an exporter of a rather narrow rangeof primaryr products whereas it depends on foreign supplies for almostall industrial goods and fuel and in most years also for some of thebasic foodstuffs. There has always been a trade deficit, small in thepre-war period but rapidly increasing after the war when French fundswere made available in volume for investment in the pub'lic sector. Inthose years exports covered on the average about two-thirds of imports.

63. With investment down, Europeans leaving the country in largenumbers and exceptionally high agricultural exports, the trade deficitfell sharply in the first years after independence. There was no pay-ments problem in those years in spite of the large repatriation ofFrench private capital, because initially Tunisia remained a fullmember of the French franc area, and current payments by the FrenchGovernment for military bases and for civil expenditures were high.Moreover, when French direct financial aid was suspended in 1957, U.S.aid gradually replaced it and Tunisia suspended service on FrenchGovernment loans. sJith the introduction of control on capital transfersin January 1959, foreign exchange reserves rose rapidly- until about themiddle of 1960.

6h. The revival of the economy in 1960, the severe drought in1961, as well as the higher volume of U.S. aid, are responsible for thereappearance of trade deficits of substantial proportions. Exportscovered barely half of imports in 1961. Deficits on private servicesalso increased, reflecting larger remittances by foreign technicalpersonnel and higher expenditures for freight. Tourism, although stilla small foreign exchange earner, suffered severely in 1961 because ofBizerte. Fortunately, expenditures by foreign governments, mainlyFrench military expenditures and civil expenditures for pensions,contributions by the French Government to salaries of French teachersand technicians and for various social and cultural activities, althoughlower than in previous years, have remained important. Royalty paymentsfor the shipment of oil through La Skhirra are already substantial. Oncapital account, receipts from U.S. foreign assistance - surplus commo-dity deliveries, foreign exchange grants and disbursements under AIDloans - continued to increase, reaching a level of almost 50 million in1961. Private capital inflows, consisting mainly of expenditures foroil exploration and in 1960 for the La Skhirra installations wereagain of some importance. Foreign exchange reserves did not thereforedecline as drastically as they otherwise would have done.

65. Private capital is still leaving the country but to what extentis difficult to estimate. It is known that Europeans use their normaltravelling allowances to transfer funds abroad and in the wake of Bizertedinar notes were smuggled abroad. French nationals leaving Tunisia de-finitively are now allowed to transfer their assets in several instal-ments on presenting proof of permanent residence in France. Externa]

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accounts and reserves have also been affected, to an uncertain degree,by transactions of the Algerian provisional government. ,ome of itsforeign exchange reserves are thought to have been held Ly theTunisian banking system and will presumably now be withdrawn.

Summary Balance of Paymentsin million dinars

Current Account 1957 1958 1959 1960 1961

Exports (f.o.b.) 5L.0 6L.h 60.2 5L.2 h8.2Imports (c.i.f.) -63.L *-64.9 -67.3 -83.0 -90.5

Services (net)

Private - 3.0 - 3.1 - 6.7 -17.7 -10.3Public L2.9 32.3 2027 20.6 19.3

Balance on current account 30.5 28.7 6.9 -25.9 -33.3

Capital Account, Net( - means outflow)

Public 15.9 8.4 13.L 18.4 21.0Private (estimate) -52.9 -28.5 0.5 8.3 3,0

Balance on capital account -37.0 -20.1 13.9 26.7 2L.0

Net change in assets - 6.5 8.6 20.8 0.8 - 9.3

66. The reappearance of large trade deficits in 1960 and 1961 canbe viewed as a return to a more normal situation for a developingcountry. However, they also point out the basic weakness of Tunisia'sforeign trade position: agricultural exports fluctuate widely with"exceptional drought years" occurring fairly frequently; all fuel,machinery, equipment goods and many important consumer items have to beimported. In the past, local production had to compete with Frenchsuppliers and in return many exports have benefited from high pricesin the protected French market. There has not been, therefore, anygreat pressure to change the structure of foreign trade.

67. During recent years, agricultural exports have accounted onthe average for about two-thirds, and the three major crops, cereals,wine and olive oil, for about half of total exports. Exports of miningproducts, mainly phosphates and iron ore, accounted for another 30% andvarious industrial and manufactured goods, including cement, for theremainder.

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68. Exports were exceptionally high during the late L9501sreflecting, however, neither a higher competitiveness nor an increasedand more stable productive capacity. Bad grape harvests in France andbelow average olive crops in Spain and Italy coincided with excellentcrops in Tunisia, which sold at higher prices. Other agriculturaland mining exports sold also relatively well, In 1960 exports ofolive oil declined substantially, wine could only be sold at muchlower prices to France and other exports, particularly phosphates, alsolost ground; in 1961 only a very small quantity of hard wheat wasavailable for export, and the export of iron ore declined because of areduction of steel production in the U.K., and of cement because ofdamage to the plant in Bizerte. At dinars 48.2 million, exports weredown by about 25% from their high in 1958.

69. Imports remained fairly stable during the 1950's, with con-sumption goods increasing and equipment goods declining regularly.Machines were not renewed, both in agriculture and in industry, andstocks of spare parts were drawn down, wrhereas changes in taste favoredstrongly certain types of imported consumer goods, such as artificialfibres in textiles, transistor radios, and others. In more recent years,foodstuffs accounted roughly for about 20%, fuel for 10%, machines andother equipment goods for a further 20%, textiles and clothing for 28/,and various manufactured goods including private cars, for the remaining32%. The steep rise in imports in 1960 and 1961 was directly related tothe higher investment and building activity and consisted largely ofmachines, transportation equipment and construction material; in 1961substantial amount of wheat and barley had also to be imported. For thefirst time, the import of equipment goods was again higher than in 1949.

70. Tunisia has been trying for a number of years to develop tradeoutside the franc area. A number of bilateral trade agreements have beenconcluded with Eastern Bloc and Asian countries and efforts to export mor3to Western European countries have had some success. The tariff intro-duced after the. dissolution of the French-Tunisian customs union in 1959offers some protection against French imports, although both countriesgrant each other exemptions or preferential rates and imports fromFrance remain free from quantitative controls. Exports to the francarea stil2 account for over 50% of total exports and imports from thefranc area for almost 60% of total imports. Hard wheat and wine continueto benefit from a privileged position in the French market under aFrench-Tunisian trade agreement concluded in 1959, and, despite thedevaluation of the French franc, bring far higher prices in France thanelsewhere. Special advantages granted by France to many other Tunisianproducts, such as tariff quotas, make their export to other countriesrelatively unattractive and in general, habits, knowledge of the market,banking and payments arrangements have all favored transactionswith France.The 1959 trade agreement with France renewable each year was not renewedin 1961 but privileges accorded Tunisian products in the French markethave in fact continued.

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71. Apart from the pull of the French market, the main difficultyin finding new markets is the weak competitive position of most Tunisianexports, either because of high production costs, unstable supply or acombination of both. The decision not to follow the last French devalua-tion was no help in this respect. Whereas it hurt the market forTunisian products in France, it did nothing to make sales to othercountries any easier. Export prices of cement, lead products and cannedfoods are subsidized through higher prices in the domestic market.Phosphates will be more difficult to sell with Morocco as a competitor.There is no established market of any size for wines of Tunisian qualityoutside France. Traditional handicrafts have yet to adapt themselves tochanges in taste. The exports withL reasonably solid prospects areconfined to olives and olive oil, citrus, other fruits and gardenvegetables, and perhaps iron ore for which the United Kingdom has sofar offered a reliable market,

72. Tunisia has so far shown no active interest in the opportunityto be associated with the European Common Market through her relationshipwith France provided for in the Rome Treaty. The government hopes tonegotiate jointly with Morocco and an independent Algeria, a separateand direct agreement with the Common Market, which would recognize theirneed to protect domestic industries.

VII, PROSPECTS FOR ECONOMIC DEVELOPRENT

73. Tunisia is impatient - inpatient for the French to evacuateBizerte, impatient for the internal political situation in Algeria tobecome stable, impatient to reduce economic dependence on France andthe French and impatient to fight poverty at home.

74. On the other hand, Tunisia has shown considerable ability tomanage her affairs and the rapid transition to a wholly Tunisianadministration has, on the whole, been handled well. There is stillmuch improvisation but enthusiasm has generally been tempered arith asaving sense of realism wghen it comes to day-to-day decisions. Bit-erpolitical arguments with France did not prevent the negotiation offinancial and trade agreements favorable to Tunisia, the establishmentof normal banking relations or the employment, even during and imnediate.yafter the clash over Bizerte, of French contractors, teachers andtechnicians.

75. France and the French are still important in almost everyphase of the Tunisian econonv. With the independence of Algeria there ishope that satisfactory official French-Tunisian relations can berestored, except perhaps -f the French poEition in Algeria sharplydeteriorates. But the exodus of FrencLmen and other foreigners, whichhas already made serious inroads into the ranks of skilled andprofessional workers, appears irreversible. The number of foreigners inall occupations declined by about one-third after Bizerte, and thedecline continued in 1962, though at a reduced rate.

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76. IWhile Tunisia would wish to give overriding priority toeconomic and social development, she cannot escape from the preoccupatiorof the future of Algeria, whose emergenco as an independent nationalters the political balance in North Africa significantly and is boundto determine largely what future French-North African relations will be.With a population three times larger and much richer in naturalresources, Algeria will be in a position to over-shadow Tunisiaeconomically and politically. In the past, Tunisia was able to act onmany occasions as a counsellor for moderation with the Algerian leadersand an independent Algeria following a moderate course appears to be anecessary condition for sound economic development in Tunisia. At thesame time, it must be recognized that an Algeria which again provedattractive to French capital, would be likely to divert from Tunisia (arndMorroco) funds which would otherwise have gone there.

77. Tunisia is now preparing herself for the more arduous task ofplanning for accelerated economic growth, as laid down in the government's1962-71 economic perspectives and in more detailed form in the 1962-64pre-plan, -"pre-plan" for a number of reasons: the uncertainties foreconomic development planning in a North-African context, a fragilestatistical framework, the detailed preparation of individual projects ir.many cases still to be completed and organizational improvements to beworked out. A summary description of development objectives as statedin the Government's plans is given below. The Bank has not yet studiedthe perspectives or the pre-plan in detail; it intends to do so beforethe end of 1962.

78. The principal objectives for future development are fullemployment, at least of the male population aged between 20 and 60, aminimum per capita income of dinars L5 and an average per capita incomeof dinars 100 by 1971 and thereafter self-sustained growth at satisfactoryrates. Reaching these objectives would mean a reduction of the agri-cultural labor force, accompanied by a sizeable increase of laborproductivity in agriculture, and the creation of roughly 500,000 newemployment opportunities outside agriculture, i.e. almost doubling presentemployment in the non-agricultural sectors of the economy.

79. A rate of increase of real national output of 6% annually isset as a target for the ten-year period, but it is recognized that becauseof unforeseen factors actual growth may in any one year vary from theprojected rate. Assuming an average capital output ratio of h to 1,arrived at indirectly from the Tunisian experience in the early 1950'sand from Algerian plan figures, the existence of some excess capacityinitially, an average replacement rate of 3%, and a moderate increase inproductivity, the capital formation required to fulfill the objectivesof the perspectives has been estimated .. on the basis of constant prices -at dinars 896 million net and dinars 1176 million gross for the ten-yearperiod. It will exceed dinars 100 million or 30% of gross domesticproduct from 1965 on. Domestic savings, most of them public, areexpected to increase from 7% of gross domestic product in 1960 to

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22% in 196L and 25% in 1971. This is a substantial increase by anystandards and the most ambitious feature of the whole perspectives. Thebalance of payments deficit and implicitly the volume of foreignassistance is supposed to vary between dinars 30 and hO million a yearand total dinars 375 million for the ten-year period. ThereafterTunisian planners expect annual surpluses on external account at least

equal to service payments on foreign loans.

80. In spite of the unsatisfactory performance of the economy in1961, targets for -the period of the 1962-64 pre-pian were increased overthose retained in the perspectives; the target growth rate is close to 9'a year;investment is projected to amount to dinars 330 million gross anddinars 270 million net, of wqhich dinars 160 million are to be financed

under the central government's equipment budget, the remainder being

investment of state enterprises and of the private sector; the balanceof payments deficit is expected to average about dinars 50 million($120 million) a year.

81. The allocation of new investment for the three years ofthe pre-plan and for the ten-year period are shown in the table below:

New Investment

1962-64 1962-71

million % of million % ofdinars total dinars total

Agriculture 115 h2 3L2 38Industry, mining

and tourism 65 2h 157 17Power, transport

and services hl 17 120 13Education 29 11 77 9Housing 16 6 200 23

Total 270 100 896 100

82. The feasibility and effectiveness of this program cannot bejudged until the plan and its component parts have been fully workedout and examined in detail e However, purely material factors in the

Tunisian economy suggest that Tunisia's development targets areambitious, particularly for the initial stage of the development effortcovered by the "pre-plan". Such factors include the adverse climate,

the poor resource base, the scarcity of good projects and, perhaps most

serious, the lack of skilled manpcwer. Reaching the targets would meanan investment effort unparalleled in the past, which must appear large in

the light of domestic savings and foreign assistance required, even if theunavoidable delays in getting individual projects and programs started are

taken into account.

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83. In this respect there may be a conflict between the objectiveof raising the standard of living of the low income groups and that ofdevoting a larger share of available resources - domeEtic and foreign -to investment. Although better tax administration and fiscal reformwill boost government revenues, the budgetary impact of the investmenteffort in the form of a higher net burden has only been estimated in avery tentative way, and prospects for increasing public savings remainunpromising.

84. Tunisian planners appear generally conscious of the importanceof allocating investment resources carefully, geared to satisfyinglegitimate consumption needs, creating employment and closing the gap onexternal account. However, it is not clear whether, in establishinginvestment priorities, they have in all cases compared proposed programsand projects with alternatives which would allow for possibly higher orquicker economic returns.

85. In agriculture, the greatest benefits will be necessarily longrun, through soil and water conservation to halt and eventually toreverse the deterioration of arable and non-arable land. Production car.be increased through the use of better farming methods in traditionalagriculture, expanding those crops for which local conditions arefavorable and local consumption is likely to increase, completingirrigation schemes and improving pastures and animal husbandry. Thiswill inevitably be a slow process, depending for its success as much onresearch and effective extension work as physical investment. A starthas already been made and past efforts are beginning to pay off.

86. Unless gas or oil are discovered in quantity, the mining sectorwill offer only limited prospects. Tunisia is working on plans for apetro-clhemical complex at the terminal of the Edjele pipeline. There isotherwise scope for light manufacturing, the production of consumer goodswhich now have to be imported and the transformation of raw materialexports to the semi-finished stage.

87. Exports are likely to grow only slowly, even if Tunisiacontinues to benefit from preferences in the French market. Moreover,because of the importance of agricultural products, exports will remainsubject to wide fluctuations. Significantly, the pre-plan projectsexports to reach only dinars 62 million by 196L, an increase of about30% over 1961, when they were exceptionally low, but still dinars 2million less than in 1958 when they reached a peak; the reasons givenare the slowness of production, particu:Larly in agriculture, to respondto the planned investment effort as wJell as the increase in localconsumption. Generally poor market prospects for most exports could beadded as another reason. Imports, on the other hand, are estimated toreach dinars 113 million in 1964, an increase of 25% over the past 'year;but information on the propensity to import, the import content of newinvestment, and its effect on income levels is far from satisfactory.

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88. The most promising prospect for increasing ioreign exchangereceipts at least cost lies with tourism. A favorab3i climate and anamiable people combine with numerous touristic attracttons to offer thepossibility of a considerable increase in the number cf visitors. Thebasic requirements are adequate accommodation and imaginative promotionwhich would combine visits to Tunisia with visits to nearby Mediterraneanareas that already attract large numbers of vacationers. On the otherhand foreign exchange receipts are likely to be affected by the expecteddiminution of expenditure by foreign governments particularly of militaryexpenditures by France.

89. An obvious unknown is the future of private foreign investment.As with almost everything else, this cannot be considered apart fromfuture relations with France, which affect the relationship between theGovernment and, the foreign, essentially French, private industrialsector of the economy. It is not certain how far hostility to the"colons"?, to foreigners in commerce and to some of the more importantpre-independence French enterprises, which have been considered fairgame to take over, has affected attitudes towards private enterprisein general. An influential left-wing believes as a matter of principlein the necessity of government intervention. It receives support frommoderates who regard it for the time being as an unavoidable necessity.There is therefore some danger that policies designed to overcome thepresent lack of private initiative may only succeed in discouraging itin an otherwise more favorable future.

VIII. CREDITJCRTHINESS

90. Tunisia has received aid in every year since independence - fromFrance until the end of 1957 and from the U.S. thereafter. U.S. aid hasreached a level of almost $50 million equivalent, in the form of surpluscommodity deliveries, grants in foreign exchange and AID loans. TheUnited States has announced its readiness to make available additionalaid of various types totalling $180 million over the period of thepre-plan.

91. The government is determined to achieve a faster rate ofeconomic growth, to raise the volume of domestic savings and is lookingfor a higher volume of external assistance for a number of years to co:aIe.In the past public savings and foreign aid have been offset by therepatriation of private capital to an extent that cannot be readi2ymeasured. The impact of new investment in the public and semi-publicsectors has similarly been offset by the reluctance of existing enter-prises in the private sector to invest in fixed assets. The reversal ofthese trends appears to be a necessary pre-condition for assuring somemeasure of success to the governmentts plans for accelerated economicgrowth.

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92. Wlhereas a rate of increase of real national output of 6%annually retained by the perspectives can be defended as a target forlong-term planning purposes, given present low income levels and apopulation growing by more than 2% annually, the fulfillment of thegrowth and investment objectives of the pre-plan will almost certainlyimpose serious strains on the economic structure. Nevertheless, theeconomy should be able to employ substantial amounts of foreign assistanceusefully in the next few years - perhaps somewhat less than thegovernment has projected in its three--year plan but somewhat more thanin the recent past. At any rate, the determination to put assistance togood use by hard work at home makes Ttnisia a highly deserving case.

93. There exists a complicated French-Tunisian financial dispute,the origin of wJhich was the suspension of French aid to Tunisia in 1957.The Tunisian government replied by suspending the transfer of service onProtectorate and post-independence debt to the French Treasury and FrenchGovernment agencies - the total, including arrears, amounts to aboutt200 million. The Tunisians argued that at least the Protectorate debtshould be forgiven. The French were prepared to make some concessions,but not in Tunisian eyes sufficient, whereupon the Tunisians suspendedpension payments to former Protectorate employees, refused tc settleproperty claims of evicted French settlers near the Algerian border, and,later, suspended the transfer of debt payments by Tunisian agencies andprivate companies to French credit institutions. The French in turnreacted by suspending payments of income tax and customs duties bymilitary personnel, by withholding war damage payments and by refusingto turn over Tunisian deposits with the French savings bank system.Devaluation of the French franc, not followed by the dinar, and thecreation of the Central Bank of Tunisia, led to further Tunisian claimsfor compensation of the devaluation loss on French franc assets and toclaims on part of the gold holdings and note issuing profits of the foriterBanque d'Algerie et de Tunisie.

9!. Agreement on most points had been reached at the technicallevel and was waiting for a political decision just prior to the clashover Bizerte. The Bizerte incident, however, brought the negotiationsto an abrupt end. WIhen they are resumed, settlement of the claims islikely to be reached in the context of a general political agreen.ent,including agreement on Bizerte. The French will then almost certainlyresume financial assistance to Tunisia which could be in excess of theamounts due on external debt and other claims.

95. Apart from debts to France, public external debt is limited toa series of U.S. government loans. These amounted to $45 million at theend of 1961 and another loan of t10 million has since been signed. Theloans have a local currency option or, when repayable in U.S. dollars,terms similar to those of IDA credits apply.

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96. In view of the moderate amount of U.S. debt and the likelihoodthat France will settle her financial dispute on terms that will notimpose a serious burden, there would appear to be some scope for Banklending. Tunisia, however, wrould be unitse -to exhaust all at once herlimited capacity to carry debt on conventional terms: per capita incomein Tunisia is only about $150 equivalent; the past performance of theeconomy has been unspectacular and achieving a higher rate of growth willnecessarily be a slow process. On the other hand, Tunisia can be expectedto make a reasonable effort to raise domestic savings and to create a morefavorable environment for economic growvth. All this augurs in favor of atleast some financing for worthwhile projects on terms similar to those ofI.D.A.

STATISTICAL APPDiDIX

Table No0

Estinated External Debt Outstanding as ofDecember 31, 1960 1

Gross Domestic Product and Expenditures 2

Projected Increase and Use of Resources 3

Agriculture and Livestock 4

Mining, Industry and Power 5

Ordinary Budget: Expenditures and Revenuaes 6

Equipment Budget 7

Wholesale and Retail Prices 8

Monetary Survey 9

Foreign Trade: Volume; Terms of Trade 10

Exports - Principal Commodities 11

Imports - Principal CorLmodities 12

Trade by Currency Areas 13

Balance of Paynents 14

Table 1

Estimated External Debt Outstanding as of December 31, 196 r/

millions ofNew French Francs

French Franc Debt 2/

a) Debt to French Government

Loans of the Fonds de DeveloppementEconomique et Social and consolidatedadvances of the French Treasury

Amount outstanding 668.2Arrears : capital 131.9

interest 54.2Total 75T.3

Non-consolidated advances of theFrench Treasury

Capital 85,0Interest 7.5Total 92.5

b) Debt of Tunisian residents to FrenchPublic Credi.t Institutions 3/

Caisse des Depots et Consignations 44.9Caisse Nationale 16.4Credit Foncier de France 1L4.0Caisse Nationale de Credit Agricole 25.0Credit Populaire 1.1

Total 101.57

c) Total French Franc Debt lo48.3

millions ofU.S.Dollars

U.S. Dollar Debt

Development Loan Fund 6.25Export-Import Bank 1.00

Total 7.25

1/ Excluding claims of foreign owners of property taken over by theTunisian Government.

2/ No service payments have been made since 1957.3/ There is disagreement between the French and Tunisian Governments on

the definition of this debt. The Tunisian Government considers thatthe guarantee of the Tunisian Treasury does not cover debts contractedby French nationals (corporations and individuals) no longer residingin Tunisia. Arrears of service payments are estimated at aboutNF 10 million.

4/ Repayable in either pounds sterling or FreaLih francs.

Table 2

Gross Domestic Product and Expenditures(millions of 1957 Dinars)

1950 1955 1956 1957 1958 1959 1960-

Resources

A.griculture 60.2 5[.1 75.4 68.4 90.6 77.4 8h.6M.ining 6.8 9.5 9.2 9.1 9.3 8.5 8.7Industry 19.2 21.5 23.4 23.8 26.5 24.3 30.4Construction 12.3 12.2 9.6 7.1 9.3 10.4 13.8P'ublic Utilities 2.3 3.7 3.8 4.0 3.9 4.o 4.bTransport and communication 13.8 17.0 17,1 17.4 17.7 17.9 19.6Commerce and banking L1.6 42.0 17.7 43.2 46.5 41.8 L9M2Other services and Government 31.1 50.8 h2.5 4h1.6 45.6 52.5 57.6

Total 187.3 210.8 288.7 217.7 2L9.4 236.8 268.3

Indirect taxes minus subsidies 16.9 22.4 . 20.0 20.8 20.1 21.4 21.8

Gross Domestic Product 204.2 233.2 248.7 238.5 269.5 258.2 290.1

Import of goods and services 63.9 69.7 72.8 68.4 66.5 72.8 76.0

Total available resources 268.1 302.9 321.5 306.9 336.0 331.0 366.1

Expenditures

Consumption (private andpublic) 168.5 225.0 253.4 230.6 250.7 237.L 269.b

Gross investment L2.0 35.3 28.5 23.1 27.8 31.6 L5.7Export of goods ancd services 57.6 L2.6 39.6 53.2 57.5 62.0 51.0

Total use of resources 268.1 302.9 321.5 306.9 336.0 331.0 366.1

These are official estimates handed to the 1962 f]F mission. The Bank hashad no opportunity yet to discuss the estimates with the Tunisian authori-ties. They appear high. The AID team which visited Tunisia in November1961 estimated G.D.P. at Dinars 261 million for 1960.

Source: Secretariat d'Etat au Plan et aux Finances.

Table 3

Projected Increase and Use of Resources(millions of 15957 Dinas)T

1960 1964 1971

Gross Domestic Product 290 355 86

Import of Goods and Services 76 121 122

Total available resources 366 476 608

of which used f'or:

Consumption (public and private) 269 277 360

Gross Domestic Capital Formation 46 125 157

Export of goods and services 51 74 91

Gross Investment ratio 16% 35% 32%

Gross Domestic Savings ratio 7% 22% 26%

Source: Perspectives Decennales de Developpement 1962-71;Plan Triennal 1962-1964.

Table 4

Agriculture and Livestock

1950 1957 1958 1959 1960 1961

in thousands o7f mietric tons)

Agricultural Products

Hard wheat 280 366 414 411 36 170

Soft lwheat 180 132 124 105 79 43

13erle;y 190 185 282 226 136 50

(live oil 4o 5o 127 32 120 32

(Jitrus 32 70 73 67 75 75

Dates 33 28 45 48 30 45

Esparto 142 69 55 74 101 90

(in thousands of hectoliters)

'dine 770 1,600 1,950 1,650 1,500 1,4oo

General Index (1945/49 = 100) 128 123 219 160

(in millions of heads)

Live stock

Cattle o.4 o.5 o.6 o06

Sheep 2.4 3.0 3.4 3.8

Goats 1.7 1.3 1.4 1.2

CaineLs 0.2 0.2 0.2 0.2

Source: Service des Statistiques: Annuaires Statistiques et BulletinsComnparatifs Trimestriels.

Table .

Mining, Industry and PowTer

1950 1957 19,58 1959 1960 19617in thousands of metric ton'sT-

]itining

Phosphates 1,525 2,067 2,279 2,184 2,101 1,982

Ircii ore 758 1,175 1,103 981 1,030 938

Lead ore 31 37 .36 28 32 26

Zinc 6 7 6 6 7 6

;,alt 94 150 170 92

Ladustry

Super-phosphates 50 129 142 158 163 122

:Hyperphosphates 145 99 101 100 61 66

Lead Ingots 23 25 25 22 20 16

Cement 169 4C1 345 442 405 329

Canned Vegetables 0.8 3.1 5.1 5.3 5.7

Canned fruits lol 3.7 5.8 6.1

Carmed fish 3.1 4.3 5.1 4.2

Tobacco products 2.6 2.8 305 3.2

Electric Power (in mLillion Kwh)

Thermal 141 212 203 222 227 259

Hydr,a - 26 32 35 45 23

Total 141 238 235 257 272 282

Source: Service des 'Statistiques: Annuaires St;atistiques et BulletinsComparatifs Trimestriels.

Table 6

Ordinary Budget: Expenditures and Revenues /(millions of Dinars)

1956/57 1957/58 IL58/59 1959/60 1960 1961 19629 months

Expenditures

Debt service 6.o 7.0 6e8 6.o 3.9 7.2 6.o

Subsidies 4r6 5.0 50( 4.o 4.4 5.0 5,9

Defense 1i8 2,7 409 4.9 3e7 4.8 4.8

EPducation 7.6 7r8 8.)4 9.1 708 12.0 13.3

Health and SocialServices 3.8 4.4 5.0 5.8 4.8 6.9 702

Other 1701 19.6 16.7 18.8 15.5 19.9 19.6

Total 4o.9 46.5 46.8 48f,6 4o.1 55.8 56.8

Revenues

Direct taxes 8.1 9.6 10o6 10.1 7.3 10.1 9.7

Indirect taxes 21.7 23.7 23.6 25.1 21.6 33.0 34h3

Various levies and dues 0.7 0,8 0.8 0.9 0.7 0.9 0.9

Yoriopolies 7.6 9.1 8.6 9.3 8.1 8.5 8.2

Other 2t8 3.3 3c2 3.2 2.4 3.3 3.7

Total 4o.9 46.5 46..8 48.6 4o.1 55.8 56.8

1i These figures are original budget estimates. Actual results are available

only for total figures and are given on page 13 of the report.

Source: Budget documents,

Table 7

Equiipment Budgetmillions of Dinars)

1956/57 1957/58 1958/59 1959/60 1960 19619 months

FEpenditures 9.4 11.6 13.9 20.3 17.9 26.5

Financing

Ordinary Budget Contribution 4.O 2.4 1.0 3.9 7.8 h47

Appropriation for repaymentof debt to France h.6 500 4.2 3.0 5.9

Foreign Aid 5.4 1.4 2.5 8.2 6.5 8.7

Treasury Resourcesi/ - 3.2 5.4 4.o o.6 7.2

1/ Including net proceeds of annual issues of equipment bonds.

Source: Secretariat d'Etat au Plan et aux Finances.

Table 8

Wfholesale and Retail Pricesi/(Monthly average: 1953 T100

1958 1959 1960 1961Dec. Dec. Dec. June Dec.

Wholesale Prices

General 113 110 118 113 116

Imported goods 122 :129 132 130 129

Food 109 101 112 106 109

Industrial gocds 122 129 128 126 127

Retail PricesE/

General 124 114 114 11h 112

Food 121 111 113 111 1I1

Other products 146 133 140o 4o 14o

1/ Wholesale and retail price indices no longer reflect price movements

adequately, since selection and weighting of items, dating from pre-war

period, is heavily based on European consuption patterns. New more

representative indices are now being worked out.

L In Tunis.

Source: Bulletins Nbnsuels de Statistique..

Table 9

Monetary Survey(millions of DinarTs

1958 1959? 1960 1961

Money Supply

Currency 28.9 34hi 39.8 443Sight deposits 43.7 5801 63.8 66&8

Total 7276 92.2 111le

Quasi Money 17.4 16.2 18.4 19.9

Counterpart

Advances to theGoverrnent 17.5 19.4 21.4 27.7

of -ThichCentral Bank 5,3 5o8 5.5 5.3Equipment Bonds 7.3 8.3 965 f1l3Deposits with P'ostalChecking System andNational Savings R'nd 4.9 5.3 6.4 11.1

Loans to the Economy 50.3 51.7 67.1 77.9of whichRediscounts lC.4 6.2 11.4 16.2

Foreign Assets, net 21.5 36.7 38.6 32.0of whichCentral Bank 19.9 35,3 35.7 31.8 3Other banks 1.6 3.4 2,9 0.2 -

Unclassified Items, net o.7 -1.4 -5.1 -6.6

1/ End of year.2/ Claims on Government for transfer of the right of issue and for

devaluation loss on French francs assets.3/ Beginning 1962, foreign assets are to be held only by Central Bank.

Source: Central Bank of Tunisia

Table 10

Foreign Trade: Volume; Terms of Trade(Indices = 1949 = 100)

1956 1957 1958 1959 1960

Volume

Imports 125 117 114 126 155of which:

Fuel 139 135 132 139 152Raw material 108 100 111 1142 149Equipment goods 67 61 73 84 150Consumption goods 152 14i 125 142 155

Exports 107 1148 155 168 145of which:

Raw materials 147 151 138 135 129Consumption goods 79 146 173 199 158

Terms of Trade 1o4 105 113 108 105

Imports, average value 129 128 134 121 122Exports, average value 134 134 152 130 128

Source: Service des Statistiques.

Table 31

Exports - Principal Commodities(millions of Dinars)

1956 1957 1958 1959 1960 1961

Agriculture 17.2 30.2 40.9 38.o 31.8 26.5

of which:

Cereals 1.4 4.9 8.5 8.o 8e6 1.6Olive oil 3.2 7.9 9.2 14.4 5.6 9.6Wine 2.9 7.8 13.1 7.5 7.3 7.8Citrus 1.3 1.6 1.9 1.8 1.6 o.6Other fruits 1.7 1.4 2.0 1.5 1.9Vegetables o08 0.7 0°8 1.0 o.6Esparto 1.0 1.1 o.8 0.8 1.3 Oe9

M4ining 15.0 16.1 16.6 15.5 14.8 14.6

of which:

Phosphates 7.6 8.7 11.3 1065 8.9 909Iron Ore 4.3 4.5 4.2 3c2 3.3 3c0Lead and products 3.0 2.7 2.6 1.7 1.4 165

?1anufactured Goods 1.5 1.9 1.4 0.9 11 0.9

Other Exports 5.6 6.0 5.5 5.2 2.6 4.5

Total 39.3 54.2 64.4 59.6 50.3 46.5

Source: Service des Statistiques: Annuaires Statistiques;Bulletins Comparatifs Trimestriels

Table 12

Imports - Principal Commodities(millions of Dinars)

1956 1957 1958 1959 1960 1961

Foodstuffs and Beverages 21.6 16.1 12.3 12.5 15.1 23.,8

of which:

Cereals 6.O 3.5 1.0 2.3 501 13.4

Sugar 4.5 3.8 3.6 3.2 3.1 2.7

Tea 17 2.0 1i4 1.7 1.7 1.8Dairy products i.4 1.3 1.2 1.1 12 1.3

Fuels and Raw Materials 18.9 19.0 21.1 20.5 25,6 26,3

of which:

Petroleum products 5.3 6.1 5.6 6.2 6.6 6c6

Iron and steel 1.9 0.7 2.5 2.1 4.1 5^6Lumber 1.3 2.3 1.4 1.5 2.0 2.2

Manufactured Goods 27.5 28.3 31.5 31.2 39.4 38t;3

of w'Jich:

TeOfltiles 10.6 12.5 12.8 12. 9 13.7 1365Pharmaceutical products l. 1.6 1.9 1.8 2..0 2,2

Paper products 1.7 1.8 2.0 1.9 2.0 2.3

Radio and TV sets o.4 0.5 0.5 o06 1.0 1.0Passenger cars 1.7 13 1.5 1.9 1.9 1.7Trucks 0.5 o.6 1.2 1.5 2.6 1.5

Yachines 5.4 4.3 5.7 5.2 9.0 12.1

Total 68.O 63.4 64.9 64.2 8001 88.4

Source: Service des Statistiques: Annuaires StatistiquesBulletins Comparatifs Trimestriels

Table 13

Trade by Currency Areas(millions of Dinars)

1956 1957 1958 1959 1960 1961

Imports

Franc area 52e2 47.0 49.5 43.9 49.1 48.8United States 3.2 3.6 2.2 2,8 6.3 13.2EEC (France excluded) 4,7 5.6 5.O 6.2 10.1 10.2

United Kingdom 2.7 2.7 1.9 3.2 3.0 2.4Others 5.2 4.5 6.3 801 11.6 13.8

Total 68eO 63.4 64.9 64.2 80.1 88.4

Exports

Franc area 24.5 35.7 43.8 33.6 29.6 26a7United States 0o.3 1,6 1.5 1.2 01 0o3EEC (France excluded) 5.3 7.O 6.7 13.2 7e3 508United Kingdom 5.1 5.7 3.7 3.4 3.7 2.9Others 4.1 4.2 8.8 8.2 9.6 10.8

Total 39.3 54.2 64.4 59.6 50.3 46.5

Balance

Franc area -27.7 -11.3 - 5.7 -10.3 -19.5 *22elUnited States - 2.9 - 2.0 - o.8 - 1.6 - 6.2 -12^9EEC (France excluded) o.6 1.4 1.7 7.0 2.8 - 414United Kingdom 2.4 3.0 1.8 0,2 0.7 - 0.5Others - 1.1 - o,; 2.5 0.1 - 2.0 30O

Total -28.7 - 9.2 - 0.5 - 4.6 -29.8 4109

Source: Services des Statistiques: Annuaires StatistiquesBulletins Comparatifs Trimestriels

Table 14

Balance of Payments(millions o•TT95irs)

1958 ]959 1960 1961 v

A. Goods and Services (excluding Group B)Exports, f.o.b. 64.4 60.2 54.2 48.2Imports, c.i.f. -64.9 -67 ,3 -83.0 -90.5

Trade balance - o.5 - 7.1 -28.8 -42.3Services, net (excluding Group B) - 3.1; - 607 -17.7 103

Total - 3.6 -13.8 -46.5 -52.6

B. r'oreign Government Expenditures in Tunisia 32.3 20.7 20.6 19.3

C. Total Goods and Services 28.7 6e9 -25.9 -33.3

D. Private transfer payments and capitalTransfer payments - 0.1 0.3 0.8Recorded capital movements - 0.3 - 0.2 8.0 5.0Net errors and omissions -28X2 0o6 - 2.8

Total -28.5 0.5 93.3 3.0

.E Total (C plus D) 0.2 7.h -17.6 -30.32/

IT. Official transfer payments and capitalIU.S. grants 8.3 13^4 17.9 18.4U.S. loans 1.1 - - 2.2Other grants 0.2 0.1 0.8 0.7U.S. Government holdings of dinars 1.8 - 0.1 -

Repayments of loans - 2.9 - -0.3 0.3IBHD subscription - 0.1 _

Total 8e4 13.4 l8.4 210

G. Mlonetary movementsNet LIF position - 0.2 - - 0.2 -0,2Commercial bank assets, net (increase -) - O05 - 5.3 o.6 3.0Central Bank assets, net (increase -) - 7*/ -.14.6 - 1.2 6.7Monetary gold (increase -) - - O'9 - - 0.2

Total - 8.6 -20.8 - 0.8 9.3

1/ Preliminary.2/ Other than Group G,

/ MIonetary gold included in Central Bank assets.

Source: I.M.F. Balance of Payments Division.