Tunis - Tunisia cancelled a new tax on Monday imposed on travellers crossing Libya's border after the measure triggered rioting, highlighting the problems facing the government as it seeks to bolster shaky state accounts.
The main teachers union also launched a week-long strike on Monday to demand pay hikes in another challenge to the recently installed government, which is trying to curb state spending and reduce fiscal deficit as required by international lenders.
Tunisia has been praised as an example of compromise politics and democratic transition since overthrowing autocrat leader Zine El-Abidine Ben Ali in a 2011 uprising, holding free elections and drafting a new constitution.
But it faces pressure from its creditors to cut high public spending, including by reforming politically sensitive subsidies on basic foods and fuel.
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Authorities tried to raise money by imposing a $20 tax on foreigners crossing the Libyan border, angering residents of the frontier towns Dhiba and Ben Guerdan, who said it had hurt trade with Libya, which had responded by taxing Tunisian visitors.
Last month, a man was shot dead in clashes between demonstrators and security forces during a protest in Dhiba against the tax.
Prime Minister Habib Essid visited the two southern towns on Sunday and subsequently decided to scrap the levy. "The ministerial council has agreed to stop an imposed tax on travelers," said a statement from his office.
Essid's hoped-for economic reforms, including boosting development and jobs, will not be easy in a country which is reliant on tourism, has few natural resources, suffers from high unemployment and offers generous state subsidies.
Adding to the government's problems, tens of thousands of teachers went on strike on Monday and boycotted student exams to push for higher wages. The education ministry has rejected the demand, saying the budget did not allow for a pay hike.
Analysts said if the government agreed to raise teachers' pay, it may be forced to make more concessions in other sectors.
Public wages account for about a third of the state budget and Tunisia's powerful UGTT labor union started negotiations with the government last week to increase salaries for some 800 000 public sector workers.
A deal is expected by the end of March.