The Tunisian government and the country's main labor union signed a deal on wage increases, aiming to keep stability amid surging inflation.

The agreement includes a 5-percent annual pay rise for 680,000 civil servants until 2025, as well as a 7-percent rise in the national minimum wage, the official Tunis Afrique Presse (TAP) has reported.

It was signed in the capital of Tunis between Prime Minister Najla Bouden and the Secretary General of the Tunisian General Labour Union (UGTT) Noureddine Taboubi.

According to Bouden, the government is cooperating with the social partner to overcome the difficulties facing the country, such as the repercussions of the COVID-19 pandemic and the Russia-Ukraine conflict.

The prime minister added that the agreement is the fruit of the joint course of action between the government and the UGTT.

Taboubi said the agreement aims to maintain stability under difficult social conditions and declining purchasing power.

Local observers worried that the surging inflation which slashed purchasing power may set back the reforms needed for the heavily-indebted North African country to unlock a key aid loan from global lenders.

Tunisia is seeking a multi-billion-U.S. dollar loan from the International Monetary Fund to avoid bankruptcy. To secure the bailout, it needs to implement deep reforms, including freezing wages, cutting energy and food subsidies, as well as privatizing some state-owned companies.

In late May, the Tunisian government proposed urgent measures to cut the public sector pay, which reached a record level of 15.6 percent of the GDP in 2022, up from 10 percent in 2010.

Meanwhile, inflation rose for 11 consecutive months to 8.6 percent in August, the highest record since September 1991.

Voicing optimism, credit rating agency Fitch Ratings said on Friday that the wage deal increased the possibility of Tunisia getting the IMF bailout, as it was seen as a key step that may ease social tensions.