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Tunisia may spend over $1bn to recapitalize banks

Published: Updated:

Tunisia may spend over a billion dollars to recapitalize its state-owned banks as the government struggles to stabilize the economy after the 2011 revolution, Tunisian authorities have told the International Monetary Fund.

Plans for the rescue operation were described in a letter by the government to the IMF, which agreed earlier this month to lend Tunisia $1.74bn over two years. The letter was published on Monday.

“A priority of the government will be to implement a series of measures to mitigate banks’ weaknesses that were accumulated during years of favoritism, inadequate standards and weak banking supervision,” the government said.

Strengthening Tunisia’s banks is important to boost the economy; many businesses, particularly smaller ones, have reported difficulties in obtaining loans because of the economic and political instability that followed the revolution.

An audit of the three state-owned banks which dominate the financial system is to be completed by December, and authorities aim to decide by mid-September whether to recapitalize or merge the banks, or reduce the state’s holdings in them.

The government is preparing to “mobilize all necessary resources” to recapitalize the banks in the next two years, a process which could cost 2.6 percent of economic output or about $1.1bn, the letter said.