September 22, 2015 / 1:01 PM / 5 years ago

Tunisian government, UGTT union sign deal on public sector wage hike

TUNIS (Reuters) - Tunisia’s government and the UGTT, the main labour union, on Tuesday signed an agreement to increase the wages of 800,000 public sector workers for the second time this year after weeks of negotiations.

The North African state is under pressure from international lenders to reduce public spending and cut the deficit to help economic growth, especially after two militant attacks badly hurt its vital tourism industry.

The deal for a monthly wake hike of 50 Tunisian dinars ($25) was signed between Prime Minister Habib Essid and Hussein Abassi, head of the UGTT, which has in the past been one of the country’s political powerbrokers.

The increase will add about 500 million dinars more public spending to the budget.

“The economic situation of the country is very diffiult, and we have to make sacrifices to keep social tensions calm. But we have to get back to work and productivity to revive the economy,” Prime Minister Hadid Essib said.

International Monetary Fund Director Christine Lagarde last week urged Tunisia to accelerate economic reforms, including cuts in public spending, saying public sector pay in Tunisia accounted for about 13.5 percent of gross domestic product, one of the highest rates in the world.

The public wage hike will be the second in just a few months and will take effect from January. In April, the government increased public sector worker wages.

Tunisia has been praised as an example of compromise politics and democratic transition since the overthrow of autocrat Zine El-Abidine Ben Ali in a 2011 uprising, holding free elections and drafting a new constitution.

But many Tunisians are concerned about the rising cost of living, unemployment and the continued marginalization of rural towns - factors that helped fuel the 2011 uprising.

The government expects the budget deficit to narrow to 5 percent of gross domestic product in 2015 from 5.8 percent last year. But it faces pressure from creditors to cut high public spending, including subsidies on basic foods and fuel.

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