2023-07-26 09:11:34
The last time he mentioned the International Monetary Fund (IMF), President Kaïs Saïed had scathing words. After mentioning a “ancient curse” weighing on the IMF, the Tunisian president called, Sunday, July 23 in a speech in Rome, to “creating a new global financial institution” pour “to establish a new human order where hope replaces despair”.
The granting by this institution of crucial credit for Tunisia, strangled financially, seems increasingly compromised, according to economists and sources familiar with the matter. Despite a first green light from Washington in October 2022, negotiations with Tunis for a new loan of 1.9 billion dollars (around 1.7 billion euros) have stalled since the end of 2022. An agreement would bring a breath of fresh air to this country whose growing difficulties worry Europe and the United States, and would trigger other foreign financing.
Indebted to the tune of 80% of its GDP, Tunisia desperately needs money to pay the salaries of civil servants (680,000 in the central administration) and its current expenses. But Kaïs Saïed opposes the “dictates” of the IMF that are, in his eyes, two measures planned to obtain credit: a gradual lifting of state subsidies on basic products, including fuel, and the restructuring of a hundred public companies riddled with debt.
“The agreement is blocked because of Kaïs Saïed, who rejects the reforms proposed by his government [au FMI], especially for subsidies”, explains to AFP Aram Belhadj, research professor at the University of Carthage. With an economy marked by low wages, the country set up a compensation fund in the 1970s through which the State buys basic necessities to reinject them at low prices on the market.
For Mr. Belhadj, “if by the end of August there is no clarification of Tunisia’s position, the agreement with the IMF will be buried once and for all”. “The negotiations are completely at a standstill, it is Tunis that is blocking”confirms to AFP the economist Ezzedine Saidane, stressing that Mr. Saïed “saw things in these reforms that would penalize him politically”. The director of the IMF’s regional department, Jihad Azour, indicated in mid-April that he had not received “no request from Tunis for the revision of its program”.
“The highest tax burden in Africa”
At the beginning of June, Mr. Saïed again ruled out touching subsidies, announcing taxes instead. “to take excess money from the rich and give it to the poor”. Easier said than done: the public deficit (8% of GDP) came entirely from « compensations » state subsidies in 2022, and two-thirds of energy subsidies after the Russian invasion of Ukraine in February 2022, which caused oil prices to soar. Mr. Saidane advises against raising taxes as the country, “with the highest tax burden in Africa”is already ” at the limit “.
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 (about 6.2 billion euros), including 12 billion in foreign currency, 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 more and more difficult. The risk of default will be very high in 2024 and 2025”Judge M. Belhadj.
For Mr. Saidane, the Tunisian State “seems to have made the choice to favor the repayment of its debt, but at the expense of the supply of basic products”. The last few months have already been marked by sporadic shortages of flour, rice, sugar or gasoline, resulting in empty shelves or long queues in front of certain stores.
This financial crisis has other harmful consequences. The State can hardly finance any new investment, which condemns Tunisia to stagnate, with weak growth (about 2%) and unemployment above 15%. To finance his expenses, he is also increasingly seeking local banks, undermining their international reputation: four of them saw their rating downgraded at the start of the year by Moody’s.
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