The interim government will have no choice but to increase spending in 2011 to meet the rising expectations of the Tunisian public. This is likely to lead to more spending on social sectors and welfare and will put pressure on the internal and external financial balances and foreign reserves, which could deteriorate rapidly in the coming months if economic activity does not return quickly to normality. Fiscal policy will remain expansionary for the remainder of the forecast period, as the government increases development expenditure in the interior regions. Fiscal consolidation will be difficult to implement in 2011 as sources of revenue will be reduced owing to the disruption in business activities as a result of the protests. Evidence of this lies in the fact that on March 9th the trade and tourism minister, Mehdi Houas, moved to help the tourism sector by offering to reschedule taxes and interest payments for hoteliers in difficulty. In addition, rising commodity prices this year will only make it harder for the government to implement spending cuts. However, from 2012 onwards the government will attempt to expand the tax base-by reducing exemptions and improving tax collection. We estimate that the budget deficit reached 5% of GDP in 2010 and forecast that it will increase substantially, to 9.4% of GDP, in 2011. The deficit is forecast to average 5.8% in 2011-15. We forecast that government revenue will decline in 2011, but from 2012 onwards it will rise strongly, in line with stronger domestic demand and measures to widen and deepen tax collection. The increase in revenue will be accounted for mainly by higher receipts from corporation tax and value-added tax (VAT).