IMF says economic reforms needed to benefit ‘all Tunisians’

Tunisia reached a $2.8 billion loan deal with the IMF last year but agreed-upon reforms have failed to take shape.
Sunday 21/01/2018
A vendor displays snails at a market in downtown Tunis, on January 17. (Reuters)

TUNIS - The International Mon­etary Fund (IMF) said reforms in Tunisia were necessary to energise growth and breathe life into an economy that has been hampered by inflation and mass unemployment.

Tunisia reached a $2.8 billion loan deal with the IMF last year but agreed-upon reforms have failed to take shape. There are con­cerns that the country could lose support from the IMF, which pro­vides crucial funds to help cover the national budget and account deficits.

Tunisia also has loans worth $500 million from the World Bank, $488 million from the European Union and $150 million from the African Development Bank.

The Tunisian government is facing wrath from the public over economic hardships and perceived government inaction. The coun­try’s governing coalition faces a backlash from opposition parties and the Tunisian General Labour Union (UGTT), whose support is vital to political stability.

They argue the government is “selling out the country’s econom­ic sovereignty to the IMF” and sac­rificing “the interests of the poor and the middle class.”

Tensions escalated after the im­plementation of the government’s 2018 budget, which included tax hikes that caused the prices of basic goods to rise. Protesters took to the streets throughout the country, including in the relatively prosperous towns of Sousse and Hammamet.

The demonstrations, which were sometimes violent and in­volved clashes between protest­ers and security forces, were the largest since those that led to the toppling of former President Zine el-Abidine Ben Ali in 2011.

Tunisia is viewed as a rare suc­cess story of the “Arab spring,” being one of the few countries to make a transition to democracy in the region. However, since 2011 — through nine governments — the country has failed to reverse eco­nomic decline.

While Tunisians feel the pain of austerity measures, many under­stand the need to enact tough poli­cies to restore economic stability. This helped the government con­tain recent demonstrations with­out rescinding the budget law.

In response to claims that re­forms were an unfair burden on the poor, the IMF said it has “con­sistently highlighted the need to spread the adjustment burden in a fair way and protect the most vul­nerable from its effects.”

“The ongoing efforts to reduce the unsustainable public wage bill, which is among the highest in the world and represents about half of Tunisia’s total budget expendi­ture, relies on voluntary depar­ture,” read an IMF report released January 12.

Public servants number more than 600,000 in Tunisia, an in­crease of 24% since 2012-13.

The IMF said it has agreed with Tunisian authorities “on the im­portance of not touching subsi­dised prices for basic food prod­ucts while applying regularly a price adjustment mechanism for three main fuels that mostly ben­efit the better off.”

“The IMF helps Tunisia through financial assistance, advice on macroeconomic and structural policies, and technical expertise and training to help the economy work better for all Tunisians,” it added. “… Social protection is a cornerstone of the government’s reform programme.”

Tunisian economists said price hikes and rising inflation stem from the declining value of the Tu­nisian dinar. Left-wing politicians and trade union activists said the IMF-backed reforms were the source of the currency’s fall.

The IMF report said it has con­tinued “with a more flexible exchange rate regime to allow the dinar to reflect underlying eco­nomic and financial conditions and to protect international reserves.”

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