IMF says economic reforms needed to benefit ‘all Tunisians’
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.”