Tunisia's energy subsidies have become increasingly costly, averaging 2.1 percent of GDP over the last decade and jumping to 5.3 percent in 2022. Phasing out energy subsidies would help address not only the macro-fiscal crisis but could also improve the energy sector performance and stimulate renewable energy production.
The Tunisian authorities have provided $121 million for solar thermal and PV systems. The subsidies can cover up to 30% of initial investments in residential PV installations. The Tunisian government said that it has renewed the financing mechanism for its two national residential solar programs.
The financing will take the form of rebates granted to Tunisian households allocated by the Energy Transition Fund (FNME). The financial institution will also be able to grant loans for the purchase and installation of equipment.
Published under the title Reforming Energy Subsidies for a More Sustainable Tunisia, the report forecasts Tunisia's GDP growth for 2023 to be around 2.3 percent, subject to significant uncertainty and depending on the progress of financing conditions and structural reforms.
The global price hike also resulted in higher consumer subsidies, particularly energy, putting pressure on the budget and public debt. Given the limited access to international financing, Tunisia's Central Bank continued refinancing the domestic banking sector for treasury bond purchases.
The report recommends adopting and implementing a necessary reform agenda to meet Tunisia's external financing requirements and to promote sustainable economic growth. "Tunisia's economy remains under pressure, and reforms are urgently needed to improve the business environment and strengthen competition.