2023-04-19 08:58:22
According to experts, the year 2010 marked a decisive turning point in the partnership that unites Tunisia and donors, notably the World Bank and the IMF. Change in the nature of the support granted, muddles in the negotiation process… Negotiations with international institutions have stalled and certain support policies have changed tack. So which partnership should be favored in a context of crisis?
The IT Business School has just organized an online debate which was moderated by economist Aram Belhadj, and attended by renowned experts and economists who addressed various issues relating partnership relations between Tunisia and international institutions, notably the World Bank and the IMF.
The intervention of Hédi Larbi, former Minister of Equipment, focused on the technical and financial support granted by the World Bank, since independence to support the Tunisian economy. According to the expert, the year 2010 marked a major turning point in the partnership that unites Tunisia and the international institution. While since independence and until the mid-2000s, most of the support provided by the World Bank was used to finance infrastructure and development projects, following 2010, all WB funding went exclusively to budget support. “Since 2010, there has been a very significant structural shift. Before 2010, 90% of the World Bank’s contribution, which was around 200 million dollars a year, was used to finance development projects, there was never any question fiscal support,” insisted Larbi. He added that during the first 40 years that marked relations between Tunisia and the World Bank, on average between 40 and 50 projects are implemented each year, in different sectors, such as water, education, health and municipal projects. “Since 2010, very few funds have been invested in development projects. All the support granted consisted of budgetary support, to finance the balance of payment, salaries and others”, he specified.
Financial support from the World Bank never exceeded 1%
According to the former minister, this change, which was the choice of the Tunisian authorities, was the result of a very expansionary budgetary policy having led to a widening of the budget deficit and the balance of payment.
For Larbi, it is not the funds released that are the most important, but rather their good allocation and their wise use that make the difference. Besides, the financial contribution of all donors only amounts to 1.62% of GDP, while that of the World Bank has never exceeded 1%. “It is the way in which we are going to use and manage these resources that is the most important. The technical expertise and know-how of these organizations in the allocation and management of resources is very important. When we make an adjustment program, what matters is not the 500 million that we are lent, but it is the reforms that will accompany it”, he points out.
He further underlined that financial support is only one part of the work of the World Bank (15%) which focuses its support on technical assistance to countries in the formulation of sectoral strategies, public policies and structural reforms.
Highlighting the historic partnership between the International Monetary Fund and Tunisia, Sadok Rouai, former adviser to the IMF, recalled the role played by the institution in the creation of the BCT at the dawn of the country’s independence. Indeed, in 1956, while Tunisia was negotiating the terms of its independence, Bourguiba sent Cecil Hourani to Washington to have information on the terms of Tunisia’s accession to the World Bank and the IMF, since Freed from the colonial yoke, Tunisia needs financing. It was in the same year that Bourguiba’s adviser also requested technical assistance from the IMF for the creation of an independent central bank. The expert also highlighted the decisive role played by policies, funded by donors and developed and led by the countries to promote their progress and development in the medium and long term. The example of Saudi Arabia or that of Luxembourg, which in 1958 had quotas lower than that of Tunisia, can be instructive, according to the speaker. Today, the quotas of the two countries are respectively 2.5 and 18 times higher than that of Tunisia.
For Rouai, the muddles, which marked relations between Tunisia and the IMF following 2011, are due the inadequacy of the instruments used by the institution to negotiate agreements with the Tunisian authorities. According to the former IMF adviser, the negotiated long programs were not adapted to the context of governmental instability which prevailed following the revolution. Moreover, the inertia of governments, which have followed one another and which have been content to pass on the hot potato of the reforms, has also contributed to the adventures that marked the negotiation process between the IMF and Tunisia in 2011. Rouai also underlined that in case of failure of the negotiations with the IMF, the Tunisian authorities must have a plan B to deal with the crisis.
Fadhel Abdelkefi: “The accord du FMI
is a must”
For his part, Fadhel Abdelkafi affirmed that today Tunisia cannot do without the support of international institutions, given its enormous trade deficit which amounts to 22 billion dinars, the problems at the level of the balance of payment and the astronomical debt that Tunisia must repay in 2023. “Very simply, Tunisia today needs an agreement with the IMF to be able to face the payment of its debt in 2023 which amounts to 18 billion dinars. The funds that will be released by the IMF will not be enough to pay this debt, but this agreement can give the green light for other multilateral and bilateral funding because these countries consider that the due diligence is done by the IMF,” he stressed.
Asked regarding the use of BRICS which is presented by some as a possible alternative to international institutions, Abdelkefi said that Tunisia is very far from this prospect since this association brings together countries with very strong economic growth, which have geopolitical relations which they work to strengthen. The former Minister of Finance explained that the real question for Tunisia is whether the country is capable of creating real wealth, knowing that it is full of enormous potentials held back by outdated regulations, burdensome administrative procedures and problems that plague every sector. “We can improve the conditions of the negotiations, of course, but we cannot drop a lender,” he insisted.
The debt puzzle
Referring to the budgetary slippages which are at the origin of the explosion of the Tunisian debt, Abdelkefi explained that before 2011, Tunisia was managed like a good father. The savings which was regarding 5 billion dinars was exhausted following 2011, in a massive recruitment in the civil service. “We also had to deal with exogenous blows, such as the blows of terrorism which have been disastrous for public finances. We have substantially increased the state budget, hoping to carry out a so-called Keynesian revival, but which did not take place, in the meantime the main engines of growth have seized up, the productivity of the CPG has been divided by 10. If Tunisia had been able to produce 10 million tons of phosphate with the current world price, we might have had 3 billion dollars in foreign exchange in a single year,” he said. Abdelkefi explains the change that has taken place in the nature of the support granted by the World Bank, for the expansionary fiscal policy pursued by Tunisia since 2011 and which some economists have called, in his words, “the policy of Go and Stop”. “Obviously, what happened is that there was a policy of go and that 12 years later, we did not have the stop. It is for this reason that there has been an explosion in the budget deficit,” he insisted.
Referring to the structural change that took place in 2011 at the level of partnership relations between Tunisia and the World Bank, that is to say at the level of the nature of the support granted by the institution, the former -Minister of Finance has indicated that the Ministry of Finance has other priorities today, in this case, the payment of salaries, compensation and especially debt service. “Today, any Minister of Finance, no matter how brilliant, has priorities. First of all, it is a question of paying wages, compensations and especially paying the service of the debt which accumulates and which is paid in foreign currencies. And if you look closely at the foreign exchange reserves, certainly they are not at a dangerous level (90 days), but what is clear is that we need to take a closer look at the composition of these reserves, which belong substantially to economic agents. In the event that there is a withdrawal of these currencies, the true balance would be much lower,” he remarked.
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