2023-08-02 15:24:00
Will Tunisia succeed in obtaining foreign financial aid to support its economy? The country is facing a real political and economic crisis. Tunisian President Kais Saied sacked Prime Minister Najla Bouden on Tuesday August 1 shortly before midnight, without giving any explanation. The latter is replaced by a former senior executive of the Central Bank, Ahmed Hachani, whom he asked to ” overcome colossal challenges ».
Najla Bouden was appointed by Kais Saied on October 11, 2021, just over two months following the president granted himself full powers on July 25 by dismissing his then Prime Minister and freezing Parliament. Since this coup, Kais Saied has ruled the country by decree. The Constitution, which he had amended by referendum in the summer of 2022, greatly reduced the powers of Parliament in favor of an ultra-presidentialist system. A new assembly of deputies took office in the spring of 2023 following legislative elections, at the end of 2022, boycotted by the opposition parties and shunned by the voters with a participation rate of around 10%.
Shortage problems
The political crisis that Tunisia has been going through for two years is coupled with serious economic difficulties with sluggish growth (regarding 2%), a rising poverty rate (4 million Tunisians out of 12 million inhabitants) and very high unemployment ( 15%). While no official explanation for the Prime Minister’s dismissal has been given, several local media have highlighted President Saied’s dissatisfaction with a number of shortages in the country, particularly of bread in state-subsidized bakeries.
In recent days, several meetings have thus taken place within the government and between the president and ministers around problems of shortages. According to the media, the Head of State who recently said that ” bread is a red line for Tunisians “, fears a reissue of the bread riots which killed 150 people in 1984 under Habib Bourguiba.
In Tunisia, since the 1970s faced with a low-wage economy, the State centralizes the purchase of a large number of basic products (flour, sugar, semolina, coffee, cooking oil) before reinjecting them into the market at affordable prices. The country has been facing sporadic shortages of these products for months, linked, according to economists, to the requirement of suppliers to be paid in advance, which Tunisia has great difficulty in doing.
Discussions with the IMF already at a standstill
The North African country, where the weight of the civil service is one of the highest in the world with 680,000 civil servants and a hundred monopolistic public companies, is strangled by a debt of around 80% of GDP and in search foreign aid.
In this context, it is difficult to imagine a continuation of discussions with the IMF, which Kais Saied contests by proposing ” a new global financial framework “. He hammers indeed his refusal of the ” dictates of the Fund which are, in his eyes, the lifting of subsidies on basic products and the restructuring of the hundred public companies riddled with debts, two measures proposed by the Bouden government in exchange for the loan.
Despite a first green light from Washington last October, negotiations with Tunis for a new $1.9 billion IMF loan have stalled since the end of 2022. An agreement would bring a breath of fresh air to a country whose growing difficulties are worrying Europe. and the United States, and yet trigger other foreign funding.
« Negotiations are completely at a standstill, it is Tunis that is blocking “, confirms to AFP the economist Ezzedine Saidane, stressing that Kais Saied “ saw in these reforms things that would penalize him politically ».
Kais Saied prefers to raise taxes
The director of the IMF’s regional department, Jihad Azour, indicated in mid-April that he had received ” no request from Tunis for the revision of its program ». « Since then, nothing has happened. “A source familiar with the matter told AFP. At the beginning of June, Kais Saied had once more ruled out touching subsidies, announcing taxes instead for “ take excess money from the rich and give it to the poor ».
Easier said than done. The public deficit (8% of GDP) came entirely in 2022 from state “compensations”, and two-thirds from energy subsidies following the Russian invasion of Ukraine in February 2022 which caused oil prices to soar. ” There is not much that can replace the gradual increase in prices at the pump envisaged by the IMF program “Said a source to AFP. A tax increase is also discouraged by some economics, Tunisia already having the highest tax burden in Africa.
If Tunisia decides to do without the IMF, can it hold on or will it default by ceasing to repay its debts? For 2023, the country can meet maturities estimated at 21 billion dinars, including 12 in foreign currency (regarding 4 billion euros), thanks to tourism, remittances from the diaspora, phosphate exports and the fall in the cost of energy, according to economists. ” But in the absence of an agreement, the situation will become increasingly difficult. Default risk will be very high in 2024 and 2025 », judge Aram Belhadj, teacher-researcher at the University of Carthage.
The Tunisian head of state assures him to seek funding elsewhere. Can it get there with the help of Europeans and some Arab countries, like Saudi Arabia which recently announced a loan and a donation of 500 million dollars? The EU concluded in mid-July a ” strategic partnership with Tunis, which provides for the payment of 255 million euros this year, including 150 million euros as a direct contribution to the budget.
Brussels might also bring in the future a ” macro-financial assistance of 900 million euros, supposed to be conditional on political reforms and respect for human rights which have regressed in the country, according to NGOs.
(With AFP)
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