June 13, 2011 / 4:50 PM / 8 years ago

UPDATE 1-Tunisia 2011 budget up by 11 pct to 21.33 bln dinars

* Budget to pay for fuel and food subsidies, compensation

* Tunisian economy still recovering from January revolution

(Adds details, foreign investment)

TUNIS, June 13 (Reuters) - Tunisia’s interim government has increased its budget for 2011 by 11 percent to 21.33 billion dinars ($15.5 billion), largely to pay for subsidies on fuel and basic necessities, the Tunisia state news agency said on Monday.

The previous budget of 19.19 billion was proposed in December by the government of former president Zine Al-Abidine Ben Ali, who was toppled after 23 years in power by mass protests on Jan. 14.

Those protests hurt the economy and scared off investment in the short term, increasing economic hardship for many Tunisians.

Prime Minister Beji Caid Sebsi announced the revised budget in order to “take account of exceptional measures taken after the revolution of Jan. 14,” the agency said.

“The state budget is under a lot of pressure, notably to enable the subsidy of basic consumer goods and fuel. It is also confronted with major challenges like rising salaries, compensation for 281 companies affected (by the crisis) and employment for 700,000 jobless.”

Tunisia’s turmoil spooked tourists, and strikes and violence since Ben Ali fell have disrupted production, especially in the textiles sector.

Unlike neighbours Algeria and Libya, Tunisia does not have vast oil and gas reserves and relies heavily on services, although its diversified economy is seen as a strong advantage.

The African Development Bank’s president Donald Kaberuka said he will lend around $1.1 billion to Tunisia this year, and the World Bank and European Union have also pledged funding.

The World Bank forecasts 1.5 percent growth this year.

Tunisia’s Foreign Investment Promotion Agency (FIPA) said on Monday political upheaval will cut foreign investment by a fifth this year to 2 billion dinars, but 2012 is likely to see a 75 percent rebound if stability can be maintained. (Reporting by Tarek Amara; Writing by Tim Cocks; Editing by Ron Askew)

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