Tunisia, in debt, turns again to the IMF ~ #REUTERS:

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After years of economic gloom and short-term management, the Covid-19 pandemic has brought the small North African country to its knees: its external debt has reached the symbolic bar of 100 billion dinars (around 30 billion dinars). ‘euros), i.e. 100% of the gross domestic product.

Tunisia must repay some 4.5 billion euros over the current year and therefore needs an extension of 5.7 billion euros to complete its 2021 budget, in the midst of the economic and social crisis – GDP has declined in 2020 like never before (-8.9%).

“The pandemic comes on top of public deficits which have widened over the past ten years and a development model based on cheap labor which has run out of steam since the end of the 1990s”, comments expert Hakim Ben Hammouda, a former Minister of the Economy.

If the IMF forecasts growth of 3.8% this year, the health situation could slow the recovery.

Finance Minister Ali Kooli is in Washington until May 9 to negotiate a new loan with the IMF. He is also due to meet with officials from the World Bank and the new American administration, asked to guarantee loans.

Prime Minister Hichem Mechichi’s office told AFP that it hoped to reach an agreement by the end of June on a three-year aid plan, for an amount still to be negotiated.

In 2013, in the midst of post-revolutionary turmoil, Tunis obtained $ 1.7 billion over two years, then $ 2.8 billion over four years in 2016.

According to Abdessalem Abbassi, economic adviser to the head of government, a new agreement should make it possible to obtain 3.3 billion euros for 2021, from the IMF and other donors and investors.

Explosive background

Few details have filtered out on the reforms envisaged to consolidate public finances in return for such aid. A large part of those planned under previous plans did not materialize, starting with improving the management of public enterprises.

At the end of March, the government signed an agreement with the powerful UGTT union providing in particular for the reform of seven public entities, including the airline Tunisair and Steg (electricity).

The government intends to finance the restructuring of public companies through “the sale of its shares in non-strategic companies (…)“and those where the State”is a minority shareholder “, Mr. Abbassi told AFP.

But the most socially explosive subject is that of compensation funds, which subsidize oil but also certain basic products such as bread, pasta or sugar.

The IMF has called for replacing these costly subsidies with targeted aid. As early as 2020, Tunis launched an automatic adjustment of fuel prices, the source of recent increases.

From the second quarter, the government also plans to gradually replace subsidies on basic foods with direct aid to families.

“Lebanese script”

But the reform remains very delicate in a social landscape devastated by the pandemic.

Austerity measures adopted in 2018 triggered strong mobilizations and calls from civil society to reschedule debt rather than borrowing again are increasing.

These attempts to rescue the national economy are the last chance“, argued Mr. Mechichi on Saturday, insisting on the need for unity to emerge from the crisis, while the political class is completely fragmented.

The government is not putting on the table a possible reduction in the public wage bill, which exceeds 17% of GDP, deemed excessive by donors, proposing instead to improve its operation.

Mr. Ben Hammouda deplores the fact that Tunisian decision-makers have, in unison with the IMF, set the objectives of budgetary orthodoxy as a priority, without at the same time developing structural reforms to boost the economy.

But he admits the current urgency: “There is a real risk of a Lebanese scenario, where the State no longer manages to meet its commitments “.

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Source: Reuters-VOA.

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About Reuters

REUTERS: is an international news organization owned by Thomson Reuters. Until 2008, the Reuters news agency formed part of an independent company, Reuters Group plc, which was also a provider of financial market data.

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