2023-11-07 10:00:17
Faced with shortages of basic commodities, it is imperative that Tunisia take rapid action to reform its system of subsidies, price controls and associated import/distribution monopolies. In its latest report, the World Bank emphasizes that maintaining stable prices for consumers is a laudable goal, but it has become unsustainable in the current context.
The World Bank’s latest economic report for Tunisia reveals an alarming situation that worries not only political decision-makers, but also the entire Tunisian population: the persistent shortage of basic products. This alarming phenomenon is the result of a series of complex factors, including excessive subsidies, declining agricultural production and the growing debt of state-owned enterprises responsible for importing and distributing these products.
Shortage: an unavoidable reality
The World Bank report begins by highlighting Tunisia’s repeated shortages of basic commodities, which are mainly attributable to a combination of interrelated factors. One key factor is the system of excessive subsidies, which has long been a pillar of Tunisian economic policy. According to World Bank data, these subsidies have contributed to the massive indebtedness of state-owned enterprises responsible for importing and distributing subsidized products. World Bank data reveals that the debt of the Office des Céréales (OdC), a public company which holds a monopoly on the importation and distribution of wheat, has almost quadrupled since 2019 to reach 5 billion dinars in June 2023. This debt now represents 30% of the total outstanding loans of the National Agricultural Bank (BNA). The impact of this overexposure to debt is considerable, limiting the ability of the OdC to obtain additional credits to import the necessary quantity of wheat in a timely manner. One of the most visible consequences of this situation is the significant drop in agricultural production in Tunisia. According to World Bank data, drought has reduced the durum wheat harvest by two-thirds in 2023 compared to the previous year. This natural disaster had a devastating effect on the availability of durum wheat products, particularly semolina. In addition, due to the substitutability between durum and soft wheat, the shortage of durum wheat has also affected products traditionally made from soft wheat, such as flour and its derivatives, including bread. World Bank data indicates that this crisis is also affecting other essential products, including coffee, tea, vegetable oils, medicines, and has been since 2022. This situation has led to repeated shortages in key markets in Tunisia.
“…As drought reduced Tunisia’s durum wheat harvest by two thirds in early 2023 compared to the previous year, the Cereals Office has had difficulty increasing its imports to compensate for the deficit. The quantity of durum wheat supplied to the market fell by 18% in the first half of 2023 compared to the previous year, thus contributing to shortages of certain cereal products,” the document underlines.
The call to action: reform to restore
Another critical element highlighted by the World Bank is the price control system that regulates commodity markets. This system, although it can guarantee stable prices for consumers, does not take into account production and distribution costs. According to World Bank data, these controls keep prices stable for consumers, regardless of changes in the underlying costs of producing and/or distributing these products. These losses are generally absorbed by the public companies responsible for importing and marketing these products. “The price control system that regulates markets for wheat and other commodities such as sugar, milk and vegetable oil is a key factor in the growing debt of state-owned enterprises that have a monopoly on importation and marketing of imported products, as well as resulting shortages,” adds the document. In light of the data and figures provided by the World Bank, it is imperative that Tunisia takes bold steps to resolve this crisis of shortage of basic commodities. Reform of the system of excessive subsidies, price controls and import/distribution monopolies has become essential. The figures reveal the urgency of the situation: the growing debt of public companies, the reduction in agricultural production, the persistent shortages and the impact on the daily lives of Tunisians. World Bank experts are calling for rapid action to liberalize markets, streamline subsidies and promote competition, while ensuring that the most vulnerable are not neglected. In conclusion, the document highlights that Tunisia faces a complex challenge, but reform of the price control system and import/distribution monopolies is essential to guarantee a stable supply of basic products. World Bank figures underline that the future of Tunisia and the well-being of its citizens depend on it.
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