In light of a blurry vision that paints the scene in Tunisia, whose negotiations with the International Monetary Fund have stalled since last October, hopes are pinned on the new government that it will present a reform program that includes solutions that can address some of the basic problems in which the country’s economy is drowning, in which debt represents about 80 percent of the country’s debt. The size of the gross domestic product, and is facing a massive liquidity crisis.
The scene appears complicated in front of the new government, as Tunisians live in a difficult reality under the weight of a shortage of many basic materials and commodities, especially bread, and in light of inflation rates that have recently barely retreated from double digits, and with negative estimates of the country’s economic prospects and the extent of the ability to fulfill external obligations, which is reflected by credit rating decline.
- Last June, inflation levels in the country recorded 9.3 percent, a slight decline from May, which recorded 9.6 percent, and in the second consecutive decline in inflation.
- According to data from the National Institute of Statistics, the inflation rate reached 10.1 percent in April, and reached a high of 10.4 percent in February.
In the middle of this year, Fitch downgraded Tunisia’s credit rating from CCC+ to CCC- due to delays in negotiations to obtain a new loan from the International Monetary Fund.
According to Fitch, the government financing plan relies on more than $5 billion in external financing, the majority of which was thought to come from the IMF. And that at a time when negotiations between Tunisia and the Fund reached a dead end.
economic reform
Tunisian economist Ezzedine Saïdane told Sky News Arabia that the most important priority of the new government is defining the features of the economic, financial and social policy of Tunisia, especially in light of the multiple and accumulated problems that the country suffers from, and with the absence of reforms that made these problems more in-depth.
Therefore, “the most important step is to determine whether Tunisia will move towards entering into necessary and inevitable reforms after being so late, or will we continue the same path linked to the pursuit of loans from inside and outside, which is the crisis that led to the exacerbation of debts and great doubts about the country’s ability.” to continue paying its debts.
He points out that “the challenges are many, the most important of which is public debt, especially external debt, on the basis that all the crises we are going through now – including the lack of basic materials in the markets – are essentially linked to the problem of debt and public finances, and institutions that have competence in all these fields. Nevertheless, It did not manage to carry out its duties as it should and provide these basic materials in the markets and opened the way for speculation and everything that would corrupt these systems, the most important of which is bread, flour and wheat.
Liquidity crisis
At the same time, he points out the “liquidity” crisis in public institutions, which has caused them to lose the confidence of their foreign suppliers and the confidence of banks at home and abroad, and accordingly, “all these problems must be put on the table, clearly diagnosed, and an agreed-upon document issued,” stressing that “there is a fear of The Tunisian authorities are part of the required reforms, given their potential repercussions on the social and economic situation (..) but not carrying out reforms is much more dangerous than these repercussions.”
The economist summarizes a set of those required reforms as follows:
- First – A necessary reform in the state’s spending pattern, especially since the state is a large spender without economic benefit (..).
- Second – Foreign trade: There is a huge waste in this context, which causes an exacerbation of the external debt and burdens the general budget.. Tunisia is able to dispense with no less than 7 billion dollars through local institutions.
- Third – Public institutions: Public institutions must be taken care of and reformed so that they can once again play their role, while they are currently unable to do so and represent a heavy burden on the state budget.
Immediate “rescue” actions
In response to a question about what “immediate and rapid measures” can be taken to save the Tunisian economy, in parallel with carrying out economic reforms that take time, the economist believes that “quick reforms have ended, and there is no room now for such reforms, and therefore it is necessary to think In deep reforms, it may take five years to return the economy to its normal track (..)”.
Saidan indicates that the proposed economic reform program is based on three main stages, namely:
- The first stage (diagnosis): If we agree on a diagnosis, we will agree on solutions if there is real seriousness, by issuing a written document that diagnoses the current situation.
- The second stage (stopping the bleeding): by drawing up a clear structural reform program, a stage that may take about a year and a half to two years to reform the economic body and make it capable of accepting reforms.
- The third stage (implementation): is the stage of entering into real reforms. And if there is seriousness, the economy can be returned to normal after that.
Last June, Tunisia prepared an alternative proposal to be presented to the International Monetary Fund, after President Kais Saeed rejected what he described as “the dictates of the Fund” regarding his country’s access to a $1.9 billion loan that was negotiated last year.
This came after talks between Tunisia and the fund had faltered since October 2022, and after an agreement was reached – after months of negotiations – at the expert level, while President Saied later announced his categorical rejection of the issue of subsidy reduction proposed by the fund; Fearing that this would cause major social tensions that would affect civil peace in the country.
Meanwhile, the European Union announced, in the middle of last month, its willingness to lend Tunisia 900 million euros in the event that we are able to meet the conditions of the International Monetary Fund.
Food security
The Tunisian writer and analyst, Nizar Al-Jilidi, tells the “Sky News Arabia Economy” website that the slogan of the new government, for which the President of the Republic chose a man of Tunisian competencies, who is primarily a man of law and a man of administration secondly, is “resisting administrative corruption” and addressing the socio-economic situation, especially in a time of Monopoly and loss of bread, loaf, semolina and flour, which is a very delicate stage; Because the hunger revolutions in Tunisia have always been their main slogan is bread.
While Tunisia imports more than 60 percent of its grain needs from Russia and Ukraine, the bread crisis in the country has worsened remarkably in recent weeks, with an acute shortage of this basic commodity recorded.
Al-Jalidi added, “Therefore, today this government has clear and public tasks… foremost of which is resistance to the barons of corruption inside Tunisia, resistance to all attempts to starve Tunisians, and resistance to everything related to disturbing the food security of Tunisians.”
He indicates that this comes after the diplomatic success of the Tunisian authorities, especially the Presidency of the Republic, in the difficult files and in the discussion with the European parties, the donor parties and the International Monetary Fund despite the length of time, but the Tunisian position is an excellent position until this moment and perhaps it will bear fruit soon as a result of that diplomacy that needs to be A strong and solid interior, and therefore this government has a bet that is the interior and the resistance to administrative corruption in particular.
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