Tackling stubborn economic crisis a priority for Tunisia after election

Despite the significant recovery of the tourism sector compared to last year, Tunisia’s GDP growth in the first half of 2019 was 1.1%, well below the 3.1% projections of the country’s budget.
Saturday 07/09/2019
Fragile stabilisation. A view of containers at a loading terminal in the port of Rades in Tunis.(Reuters)
Fragile stabilisation. A view of containers at a loading terminal in the port of Rades in Tunis.(Reuters)

TUNIS - Experts described promises made by Tunisia’s presidential hopefuls in the country’s elections as hollow and unfeasible even in the short term.

Perhaps the most sensitive issue facing the next president will be how to adjust the path of the country’s fragile economy, which remains in a dead end despite all earnest attempts.

Many Tunisians doubt that any of the 26 candidates in the September 15 presidential election can implement his or hers programme to save the country from its chronic economic crises.

Despite the significant recovery of the tourism sector compared to last year, Tunisia’s GDP growth in the first half of 2019 was 1.1%, well below the 3.1% projections of the country’s 2019 budget.

Official data for the second quarter of 2019 indicated a drop in the added value of manufacturing industries, which include the agricultural sector, building materials and textiles, of 0.8% compared to the same period in 2018. Non-industrial sectors, such as energy, mining and infrastructure, posted a decline of 2.5% compared to last year.

The experts’ predictions did not really surprise Tunisians because they have felt their economic conditions have been deteriorating since the economic crisis hit the country nine years ago, leading to the overthrow of former President Zine el-Abidine Ben Ali.

Experts at a forum on “Monetary Policies, Budget and Financial Stability in Tunisia,” organised by the Tunisian Association of Graduates of Higher Institutions, agreed that Tunisia’s economic situation is not out of the crisis zone and are still stagnating.

Former Tunisian Finance Minister Hakim Ben Hammouda emphasised that the stability of some economic indicators, including the appreciation of the Tunisian dinar against major foreign currencies and improved budget deficit, remained fragile.

The dinar has had its value rise in the official and black markets, increasing 2.2% against the euro and about 3.4% against the US dollar. The Tunisian dinar is at 2.86 dinars against the US dollar.

The Tunisian official news agency quoted Ben Hammouda as saying that indicators do not correctly reflect the country’s economic situation, “especially in light of the worsening of the national debt, increasing public spending, the deterioration of the situation of government institutions and of the social funds and the decline of industrial indicators and of investments.”

The 2019 budget forecasts that the public debt at the end of the year would be around $29 billion, equivalent to 70.9% of Tunisia’s GDP. There is consensus within economic

circles that debt-related indexes are a source of great concern. They remain at very high levels, even though they dropped from the yearly rate of 76.7%.

The state usually borrows to invest in productive development projects but often finds itself forced to use part of the loans to pay public sector employees.

International financial institutions say the public sector is largely unproductive and uses a significant portion of the funds allocated for investment, thus exacerbating the external debt crisis.

Data released by the Central Bank of Tunisia confirmed an alarming 44% rise in debt-servicing costs in the first eight months of 2019, which places extreme pressure on the government to tackle the problem before it gets worse.

Ben Hammouda said he considered restoring the pace of investments and activating sector and structural reforms to rearrange or replace the local development model top priorities that decision makers should work on.

Accountant Walid Ben Salah said improvement in the value of the dinar from February through July was because of the stability of the foreign exchange reserves resulting from Tunisia’s access to foreign loans. Reserves at the end of August stood at 17.2 billion dinars ($6 billion) for the first time in nearly two years.

The Tunisian Finance Ministry said earlier that the budget allocated to repay the principal increased in the first half of the year by about 54%, reaching $1.2 billion against $770 million in 2018.

Economic policies of successive governments since 2011 have been unable to result in appropriate solutions to two fundamental dilemmas in Tunisia: unemployment and poverty.

The unemployment rate has fallen slightly but remained high, reaching 15.3% by the end of the first half of 2019, compared to 15.4% at the end of last year. It is expected to be 15.5% by the end of this year.

The poverty rate has stabilised at more than 15.2% since 2015, raising questions about the government’s success in implementing reform plans agreed to with the International Monetary Fund (IMF), as required.

Tunisia agreed with the IMF in May 2016 on painful reforms to address chronic shortcomings in fiscal balances but the reforms have not produced positive results.

There has been evidence regarding authorities’ inability to rescue debt-laden state-owned enterprises and whose problems have been exacerbated by slow implementation of reforms and complaints of poor services, while continuous political bickering stands as the main obstacle to easing accumulated crises.

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