Tunisia Business Environment and Entrepreneurship DPF

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The development objective of the Business Environment and Entrepreneurship Development Policy Loan Project for Tunisia is to improve the business environment, and (ii) support entrepreneurship and deepen access to finance. The proposed Business Environment and Entrepreneurship Development Policy Loan (BEE DPL), in the amount of Euro 457.2 million (US$500 million equivalent), is a standalone single-tranche operation aimed at supporting key areas of reform in the Government of Tunisia’s Five-Year Development Plan for 2016-2020. The DPL would help Tunisia achieve stronger and more inclusive growth and private sector-led job creation, particularly by stimulating entrepreneurship. The Government response to the employment and social challenges by raising public sector hiring and salaries has helped maintain social peace, but has also contributed to significant weakening of Tunisia’s fiscal situation. Going forward, job creation will require a sound macroeconomic framework, a dynamic private sector and a conducive business environment. Accelerating job creation and promoting inclusion and shared prosperity in Tunisia also entails supporting entrepreneurship and deepening access to finance.The proposed DPL is informed by the challenges and opportunities identified in the Systematic Country Diagnostic (SCD). The SCD identified three key development challenges for Tunisia: (a) macroeconomic stability: the macroeconomic and fiscal environment exhibits large vulnerabilities that, if not addressed through deep structural reforms, will prevent the country from achieving its full growth potential; (b) cohesion and security: restoring security and social cohesion are prerequisites for setting Tunisia on a new growth trajectory. Attaining longer-term stability and social cohesion require continuous measures to address the economic and social exclusion of large segments of the Tunisian society; and (c) improved governance: seven years after the revolution, there is still a clear need to increase accountability, improve service delivery and create more effective means for citizens to participate in policy design and implementation. The SCD also identified two key drivers for eradicating poverty and boosting shared prosperity in a sustainable manner: (a) promotion of private-sector-driven job creation, by simplifying regulations, creating a level playing field, improving access to credit and improving efficiency of the banking system; and (b) increased equality of opportunities through transparent policies that reduce skills mismatch, strengthen the social protection system, address spatial inequalities, and target institutional failures that generate unequal opportunities.