2023-04-19 09:06:07
It is essential today to respond to the double crisis that Tunisia is experiencing. We have serious structural problems which can only be solved through a profound restructuring of the mechanisms and modes of organization of the national economy. But that will take time. In the meantime, we had two terrible shocks, Covid-19 and the Russian-Ukrainian war, which had a negative impact on the economy. There is no miracle cure of course, but the executive is called upon to move in all directions.
In the absence of essential structural reforms to restore the country’s economy, Tunisia might find itself in default. Economic experts recommend, above all, to implement structural reforms urgently, otherwise the country will face serious problems.
According to the quarterly report of the rating agency “PBR Rating” on the “Monitoring of macroeconomic and sectoral risks in Tunisia”, the structural reforms to be undertaken by Tunisia “must be oriented towards the simplification, encouragement and development of investment (local and foreign), as well as towards the protection, support and incentive for exports, particularly in industrial activities”.
PBR Rating also considers that the current climate in the private business sector as well as the financial situation of the State do not make it possible to envisage a lasting and significant economic recovery without major structural reforms (in addition to financial management measures agreements agreed with the IMF and the first effects of which can be seen in the FL2023). Structural reforms, the complexity of which, on the one hand, and the support it requires, on the other hand, presuppose a multidimensional process over the medium and long terms.
The beneficial leverage effect
The solution also lies in reducing deficits. External indebtedness is only a means of mitigating over time the costs that will be associated with the measures to be taken to restore budgetary balance and the balance of payments. External debt alone cannot be the solution, which resides in the readjustment of expenditure and revenue.
Debt in itself is not always a problem, and can even play a beneficial leverage effect when it is contracted under appropriate conditions and – even more so – allocated to the financing of relevant and efficient projects.
It becomes a burden, even a charge, an obligation from which one cannot free oneself, in the opposite cases, and these are unfortunately often the most numerous noted throughout the Tunisian experience for more than a decade. When debt-financed projects prove incapable of generating the necessary growth and therefore the resources capable of allowing its repayment, we gradually enter what is known as the “debt trap”. or the “debt trap”, a vicious circle where indebtedness leads to indebtedness, then over-indebtedness…
We go into debt, not so much to make new investments, but just to repay the accumulated debt which has not been able to create by itself the resources necessary for its repayment.
Improve the country’s position on the international market
The conclusion in October 2022 of a technical agreement between IMF staff and the authorities will allow Tunisia, once approved, probably in the coming months, to benefit from a facility under the Extended Fund Facility. for an amount of approximately 1.9 billion dollars. The finalization of this agreement will improve Tunisia’s position on the international market and will allow the international community to make a major contribution to the success of the reform program by rapidly releasing additional financing.
Knowing that, according to the indicators of the Ministry of Finance, Tunisia’s outstanding public debt reached 117.1 billion dinars (1 euro = 3.3 dinars) at the end of February 2023, up 10%, by compared to the same period last year. Domestic debt represents 43.3% of all outstanding debt, while external debt represents 56.7%, specifies the same source.
As for the external debt, it is mainly contracted within the framework of bilateral cooperation agreements (60.3%), and to a lesser extent with the financial market (21.3%) and via cooperation agreements bilateral (18.4%).
As for public debt service, it fell by nearly 36%, from 2.2 billion dinars at the end of February 2022 to 1.4 billion dinars in February 2023, following the domestic debt fell by 72%, to 384 million dinars (MD), while the external debt maintained its upward trend to one billion dinars (+19.2%). According to published statistics, the sum allocated to the repayment of debt interest stood at the level of 855 MD, thus exceeding the envelope reserved for the repayment of the principal of the debt (605 MD), which is in drop of 56.7%, in February 2023.
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