2023-10-16 10:12:31
Subsidies in Tunisia, once an essential tool to support the most vulnerable and guarantee social stability, are now at the heart of a budgetary crisis. In a context where exorbitant costs and diversions towards the black market cast shadows over the effectiveness of this mechanism, it is time to closely examine the origin of this evil and the reforms necessary to restore the balance.
Since their introduction in Tunisia, subsidies have been an essential mechanism to support vulnerable categories and guarantee social stability. However, today they find themselves at the heart of a budgetary crisis that requires urgent reform to restore financial balance while maintaining essential support for vulnerable categories.
A disproportionate expansion
To understand the current budgetary crisis, it is essential to go back to the origins of subsidies in Tunisia. They were initially put in place to alleviate poverty, stabilize the prices of basic necessities and promote social cohesion. At the time, they were a necessary response to the economic and social needs of the country. However, over time the subsidy system has expanded out of proportion.
For example, for the 2021 financial year, state subsidy expenditure is estimated at 3.401 billion dinars, or 8.3% of total state budget expenditure and 2.8% of GDP. . This constant increase in subsidy costs has contributed significantly to the pressure on public finances.
The current budgetary crisis stems largely from the management of subsidies in Tunisia, given that the latter represent a significant share of public spending, exerting considerable pressure on the state budget. The costs associated with subsidizing products such as fuel, food and energy have become unsustainable, contributing to a growing budget deficit. This high proportion has limited the government’s ability to invest in other crucial sectors such as health and education.
An impact on several levels
The impact of this budgetary crisis is felt on several levels. Excessive subsidies have distorted the economy, hampering economic efficiency and diversification. For example, fuel subsidies have encouraged overconsumption of fuel, contributing to trade deficits and import dependence.
In Tunisia, fuel subsidies have long been a key element of the country’s economic policy. They were intended to mitigate the impact of high fuel prices on consumers and support sectors that rely heavily on energy, such as transport and industry. However, this subsidy policy has had significant economic consequences.
According to the report of the 2022 amending finance law, hydrocarbon subsidy expenditures increased by nearly 4.7 billion dinars to stand at 7.6 billion dinars, compared to 2.9 billion initially planned by the LF. 2022 and once morest 3.3 billion dinars in 2021 (an increase of 129%). The substantial increase in the budget devoted to energy compensation can be largely attributed to the increase in the price of a barrel of oil, the depreciation of the dinar once morest the dollar, as well as the suspension of the adjustment mechanism of fuel prices, which was activated only four times in the previous year.
But these subsidies helped keep prices at the pump artificially low, prompting consumers to use more fuel than if they had to pay real international market prices.
This overconsumption of fuel has had several negative effects, led by increased trade deficits, dependence on imports, pressure on public finances, etc.
To remedy this situation, economic experts recommend gradually reducing fuel subsidies and establishing targeted compensation mechanisms for low-income households. This approach would help reduce overconsumption, ease pressure on public finances and promote more responsible use of energy resources. It would also reduce dependence on imports and strengthen Tunisia’s economic stability in the long term.
Diversion to black market
On another level, most subsidies do not reach the people who really need them. A concrete example of this is the ineffectiveness of the food subsidy system, where reports showed that large quantities of subsidized products were diverted to the black market instead of benefiting vulnerable households.
Indeed, this system, designed to help vulnerable households access basic foodstuffs at affordable prices, has faced major problems of inefficiency and abuse over the years.
For years, Tunisia has spent billions of dinars subsidizing various food products such as wheat, flour, olive oil, sugar and milk. However, despite this considerable expenditure, large quantities of subsidized products are not reaching vulnerable households, as was initially intended.
In this same context, today, no one can deny the reality that many subsidized food products were diverted to the black market instead of being distributed to the targeted beneficiaries. For example, bags of subsidized flour frequently end up on informal market stalls and are sold at prices higher than those approved.
Unscrupulous individuals took advantage of these subsidies to make personal profits, thus depriving vulnerable families of access to these food products at affordable costs.
And due to diversion to the black market, millions of dollars in food subsidies were lost each year, reducing the effectiveness of food subsidies and hindering their impact on vulnerable households. To combat these abuses, measures have been repeatedly recommended such as improving control of the distribution chain, digitalization of tracking systems for subsidized products, more in-depth investigations into cases of diversion, sanctions more severe to deter fraudsters…
But it is undeniable that, on the ground, there remains considerable work to be accomplished, because the implementation of these measures requires, above all, unwavering political will and the courage necessary to take action. Like it or not, the reforms needed to streamline grant management in Tunisia are often accompanied by political resistance and institutional obstacles.
These reforms must be directed towards several key objectives, including precise targeting to identify the actual beneficiaries of subsidies and vulnerable groups more effectively with more transparency for the process to be effective. In addition, it is important to ensure rationalization since subsidies must be redirected towards more strategic sectors and programs, while gradually eliminating subsidies that are no longer justified. Budgetary sustainability is also an important action to fit into an overall budgetary framework capable of guaranteeing long-term financial viability…
To conclude, in Tunisia, the current budgetary crisis is closely linked to the management of subsidies and its reform must be a national priority. Certainly, its implementation requires strong political will and a commitment to more transparent and equitable governance, but by adopting these reforms, Tunisia can not only overcome its fiscal crisis, but also lay the foundations for a more solid economic future. and fairer for all its citizens.
A call to action to restore these grants to their true purpose: to help those who really need it.
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