Tunisia gets $1.2 bln funding from Islamic Development Bank

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Tunisia has won $1.2 billion in funding from the Saudi-based Islamic Development Bank (IDB),aimed at backing industrial, agricultural and trade projects in the country whose finances have been weak since a revolution two years ago.

The IDB funding line will include loans and grants, the Tunisian prime minister's office said in a statement on Friday. The funding line will be for three years, with disbursements of$400 million each year until 2015.

The North African country, which has also signed a $1.7billion standby-loan agreement with the International Monetary fund (IMF), is struggling with rising inflation, a big external deficit and an uncertain political outlook.

Tunis is also in talks with Qatar about the Gulf state making a deposit at the Tunisian central bank "with easy conditions", Prime Minister Ali Larayedh said last month.

The assassination in February of opposition politician Chokri Belaid triggered the worst street violence since the revolution. Elections expected towards the end of this year will create fresh uncertainty.

The IDB has also given Tunisia a financial guarantee to issue a sukuk worth $600 million before 2014, the statement from the prime minister's office said.

Tunisian finance minister Elyess Fakhfakh said Tunisia planned to issue its first sovereign sukuk, or Islamic bond, this year to raise $700 million.

The government, led by moderate Islamists, is keen to develop Islamic finance, which was neglected for ideological reasons by Ben Ali's government. A Tunisian sukuk issue could potentially attract large amounts of Islamic funds from the wealthy Gulf.

The state budget deficit is expected to rise to around 5.9percent of gross domestic product this year from 5.1 percent last year.

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