Social discontent fuels concern for instability in Tunisia

The annual inflation rate peaked at 7.5% in 2018, its highest mark in three decades.
Sunday 01/12/2019
Tunisian General Secretary of Labour Union (UGTT) Noureddine Taboubi gives a speech during a civil servants general strike in the capital Tunis, last November. (AFP)
Tunisian General Secretary of Labour Union (UGTT) Noureddine Taboubi gives a speech during a civil servants general strike in the capital Tunis, last November. (AFP)

TUNIS - The annual inflation rate in Tunisia reached a near-30-year high in 2018, prompting questions on the viability of the country's financial policies.

Tunisia remains a rare case of a successful democratic transition in the Arab world but its economic indicators are a concern with the unemployment rate topping 15% and the rate of joblessness among university graduates at more than 30%.

The annual inflation rate peaked at 7.5% in 2018, its highest mark in three decades, figures from the government-run National Institute of Statistics indicated. The steep increase is a bitter reminder of an economy stalled since 2011.

Experts said the inflation rate, combined with the rapidly declining value of the Tunisian dinar, blurred lines between lower and middle class and could fuel instability. They argue the crisis is leaving most middle-class families struggling to own homes, buy cars and pay for better education for their children.

The government-run Tunisian Institute for Strategic Studies said the proportion of the middle class in Tunisia has shrunk from about 70% in 2010 to no more than 50%.

The showdown between the government and the Tunisian General Labour Union (UGTT) over salary increases for more than 2 million public-sector employees and workers of state-owned companies highlights the struggle of the middle class.

Economists warned that pay increases would make the situation worse for lower- and middle-class workers because raises would fan inflation, prompting the Central Bank of Tunisia to raise interest rates and cause more pain for consumers and businesses amid slumping economic productivity.

Inflation has eaten away at the purchasing power of citizens, especially civil servants who plan to go on strike January 17.

The general strike is planned by the UGTT, despite caution from Tunisian President Beji Caid Essebsi, who warned that a similar work stoppage 41 years ago led to bloodshed and accelerated “fraying” of the government.

“The general strike will be a turning point in the history of Tunisia and a watershed moment for the country,” UGTT Secretary-General Noureddine Taboubi said.

UGTT leaders said they will continue negotiating, hoping for a “satisfying offer” from the government but leaders in government are hamstrung by demands from international lenders, such as the European Union and the International Monetary Fund, to whom they owe some $31 billion.

Opinion polls indicated that about 80% of Tunisian respondents said the country is going in the wrong direction, with most citing unemployment and price increases among their biggest concerns.

Some politicians complain of insufficient help from the outside world and of the loss of revenue from neighbouring Libya, an oil-rich country that once provided jobs, businesses and remittances but is now a source of additional jihadist threats that have required more spending for defence and security.

Economists, however, blame the crisis on the lack of leadership from previous Tunisian governments.

“Poor policies adopted by successive governments are the causes of widening deficit of the current account,” said former Finance Minister Houcine Dimassi. “These poor policies are continuing to deepen the country’s economic crisis.” The current account deficit totalled $6.4 billion in 2018.

Officials said social unrest and strikes forced governments to adopt large spending policies, which the cash-strapped country could not afford. Experts warned that further pay raises would make the situation worse for families, businesses and the government, since the increases would fan a cycle of inflation, tax and interest rate hikes and more budget and trade deficit ratios.

“If (the government) were to sign for ($337 million) of public service pay raises we would be in the presence of irresponsible officials in this country,” said economist Moez Joudi.

“I hope they will not do that. One of the main causes of inflation is the excess in public spending. A public service wage bill of more than ($5.7 billion) is really suicidal,” he added.

Tunisian Trade Minister Omar Behi said: “Government decisions have been made since 2011 with consequences for the economy but I cannot qualify them as mistakes because the situation was special and the people were claiming their share of power from which they were deprived.

“These decisions could be populist but understandable and legitimate. Nevertheless, 40% of the budget going to salaries is the cause of the crisis.”