Are discussions between Tunisia and the International Monetary Fund (IMF), crucial for the country’s economy, about to be concluded? “Things have progressed well and I am optimistic that an agreement will be concluded soon,” French Ambassador André Parant told the Tunisian press on Friday February 10. On Tuesday, IMF director Kristalina Georgieva wanted to be reassuring, welcoming the “significant progress” made by Tunisia towards the approval of an agreement which could take place in the “coming weeks”.
The stakes are high for the country: the loan of 1.9 billion dollars (about 1.8 billion euros), under negotiation, should bring a breath of fresh air to a failing economy. Tunisia’s sovereign rating has been downgraded to “high risk” by rating agency Moody’s, which refers to a “risk of debt default” if certain financing is not secured. Inflation topped the 10% mark in December and the unemployment rate stagnated at 15%. But since December, discussions between Tunis and the IMF have been suspended indefinitely due to technical but also political blockages.
The political stability necessary for this kind of agreement – ??which involves major reforms – is indeed far from certain. President Kais Saied has been criticized by the majority of political parties since his July 25, 2021 coup and his concentration of power. The high abstention rate (89%) in the December and January legislative elections and the recent wave of arrests of opponents and members of civil society have heightened the feeling of concern.
Fear of “bread revolts”
According to several diplomatic sources, the lack of ownership by local actors of the economic reform program is particularly problematic. The IMF expects the Tunisian authorities to publicly endorse the austerity measures decided in the context of the loan in order to limit the risks of social explosion. However, Kais Saïed has still not officially recognized the need for the IMF program and continues to blame the economic problems on “speculators and corrupt people”. Unofficially, the fear of a repeat of the events of 1984, when so-called “bread” revolts broke out following the lifting of subsidies on cereal products, “still weighs on economic decision-making in Tunisia”, confides a source diplomatic.
The head of state, however, ratified the 2023 finance law at the end of December, which provides for a battery of reforms intended to rebalance state finances. The most scrutinized by international partners concerns the lifting of subsidies on hydrocarbons, which represent 5% of GDP and have increased considerably between 2021 and 2022 due to soaring international barrel prices. Tunisia wants to reach the truth of prices by the end of 2023. These rose five times in 2022, but the rise did not continue after the legislative elections, sending a negative signal about the country’s ability to meet its own commitments.
“The most important thing is not the lifting of food subsidies but the lifting of subsidies in the gas and fuel sector,” insisted Ferid Belhaj, World Bank Vice President for North and Middle Africa. Orient, in a statement to Mosaïque FM radio on February 9. “Tunisia is not alone, all its partners want to help it […] but it must also help itself,” he added.
The government has tried to provide several guarantees of its commitment to reduce the public deficit, for example by reducing the wage bill from 15.45 to 14.9% of GDP between 2021 and 2022 or by signing a decree on February 9 on the reform of public enterprise governance. “But there is still a lot to do,” said economist Abdelkader Boudriga. How can a government facing such political instability convince of its ability to implement difficult reforms? »
A period of high social risk
Another big unknown concerns the government’s ability to find funding to complete its 2023 budget and pay its debts. If the agreement with the IMF is unblocked, the first installment which will be paid this year (almost 400 million dollars) represents only a tiny part of the needs of the Tunisian budget, evaluated between 1.5 and 1.8 billion dollars, according to the Central Bank of Tunisia.
The finalization of the agreement with the IMF remains crucial to encourage other donors to help Tunisia. Currently, only France and the European Union openly affirm their support for the country. Discussions for a $1.3 billion loan from Saudi Arabia and the United Arab Emirates have failed.
These uncertainties are all the more worrying as the country is entering a period of high social risk, with the declared rupture between the presidency and the main trade union body, the Tunisian General Labor Union (UGTT), and the start of Ramadan in March. . “This is a crucial time for Tunisians and a barometer of social discontent, as families have to spend more to secure the fast-breaking meal, so frustrations rise,” comments consultant Chaima Bouhlel.
The purchasing power of Tunisians has already been greatly reduced in 2022 with the increase in prices and the shortage of certain subsidized products, including milk, rationed at two packs per day and per person in stores.
