The International Monetary Fund has approved the release of a $249 million loan tranche to Tunisia, as part of an economic reform programme, in a capital injection to the struggling economy.
The fourth tranche from Tunisia's four-year programme brings the country's disbursements to $1.14 billion from a total of about $2.9bn, according to a statement by the IMF on Saturday.
"Monetary policy must continue to focus on controlling inflation," the fund said.
Tunisia has struggled to revive its economy since the 2011 revolution that ousted its dictator and sparked protests around the Middle East, marking the beginning of the Arab Spring. Political divisions, sporadic terror attacks and repeated strikes have hit its economy hard. Consecutive governments have struggled to rein in a fiscal deficit and spur economic growth.
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Credit rating agency Moody's, which rates Tunisia B2 with a stable outlook, forecasts that the government debt ratio will rise to 72 per cent of GDP in 2018 and 73 per cent in 2019, from nearly 70 per cent last year.
In June, Tunisia's central bank raised its benchmark interest rate 100 basis points to 6.75 per cent, the second increase in three months, to tackle inflation that hit its highest levels since 1990.
In May the IMF said Tunisia's inflation rate reached 7.7 per cent in April year-on-year, reaching record level since 1991.
"More tightening of monetary conditions is necessary to reduce the gap between interest rates and inflation," it said.
There are some indicators of good news for the Tunisian government. Tourism revenues surged more than 46 per cent in the first half of 2018 to 1.3 billion dinars ($492.3 million) for the period, while foreign direct investment increased, Bloomberg reported.
"The improvement in the security environment since the three terror attacks in 2015, which has led to an increase in tourism revenue, and increased demand from the euro area have laid the foundations for a growth recovery," Moody's said.
Moody's forecasts economic growth of 2.8 per cent this year and 3 per cent in 2019, up from 1.9 per cent in 2017, on expectations a recovery in tourism.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, (Leon banned).
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
