Tunisia commits to repaying foreign debt despite pandemic uncertainties

The tight lockdown restrictions have already added to social unrest, with protests erupting in a working class district near where the president lives.
Friday 03/04/2020
A man walks toward the Central Bank in Tunis, Tunisia. (Reuters)
A man walks toward the Central Bank in Tunis, Tunisia. (Reuters)

TUNIS - Tunisia’s government vowed to repay its debt to international lenders on time even as it battles a coronavirus crisis that has battered its already stagnating economy.

“Tunisia has always reimbursed its foreign debt in time. We are keeping up with this tradition of solvency,” said Finance Minister Nizar Yaiche.

Urging national unity and solidarity, he said that “the situation was very difficult before the outbreak of the pandemic” but that “we must work hand in hand to overcome it.”

Tunisia needs to borrow some $3 billion from international lenders in 2020 to finance the budget. It is due to spend 11 billion dinars ($3.8 billion) to repay foreign debt this year.

Over two weeks ago, Tunisia’s economy took a hit when the government moved to shut down most business and commercial activity to help stop the spread of COVID-19. The country’s officials and the business community hope the measures will be short-lived, but it remains unclear when normal economic life can fully resume.

But the eruption of protests in the working class district of Mnihla, where the country’s president resides, and the use of class-war rhetoric about who should make most social sacrifices to fund emergency spending has tested the limits of the poverty alleviation measures by a government that has no structured political base against the populist reflexes of a president locked in a silent struggle with the parliament speaker. 

Sabri, a day labourer, broke into tears while telling local television that he has been out of work and unable to pay for basic needs since the crisis began. “The gas cylinder at home has been left empty for five days. I have no money to pay for it,” he said. “I come to the market each day but there is no work for me.”

Filling a gas cylinder costs around 7.7 dinars ($2.70). Sabri can earn up to 30 dinars ($10.40) a day depending on the flow of fruits and vegetables traded in Bir el-Kassaa’s main wholesale market outside Tunis where he works.

The televised image of the man weeping over his financial strain moved many Tunisians and sounded the alarm about the socioeconomic problems bubbling up.

“Coronavirus is no matter for us. We are going to die anyway,” shouted one woman as she rallied neighbours to defy a government ban on public gatherings. “Give us essential needs or let us work.”

“I work as cleaning lady. My employer told me to not come out of fear of the virus,” she said as policemen were deployed to deter the protest of several hundred.

One young man attending the protest added: “We are not afraid of the police. We have no choice left. Either we die from coronavirus or from starvation huddled at home.”

A local official attempting to calm the protesters announced on a loudspeaker: “The wali (governor of Tunis) is aware of the situation and he talked to a government minister who will go on television to detail measures to help you.”

One young man responded: “You are handing out aid to people with political connections and left the majority unsatisfied.”

Experts said there are at least 1 million who face similar prospects as the protesters in Mnihla.

“These people will not observe the lockdown and the curfew if they don't get government aid to feed their families,” said financial expert Mourad Ezzine.

Experts have pointed out another contention between public and private sectors. While 600,000 government employees continue to receive full salaries, private employees have little recourse they say, further inflaming social tensions.

A study by the International Monetary Fund (IMF) shows that Tunisia’s public sector wage bill is among the highest in the world relative to the size of its economy, with government employees’ salaries and wages accounting for more than 14% of GDP.

Tunisia has extended its nationwide lockdown measures until April 20 as the number of infections continues to increase.

The lockdown has shut down most businesses, government offices, shops, cafes and restaurants and prohibited people from leaving their homes for all but essential needs.

In response to protests and calls by the president for more urgent social measures, the government has come up with a 2.5 billion ($870 million) scheme to provide relief to the country’s poor.

The plan includes the disbursement of at least 200 dinars ($70) monthly for each poor and needy family.

Noureddine Bettaieb, editor of the country’s main Arabic language daily Alchourouk, warned: “If the government fails to come up with the efficient and urgent solutions to offer the minimum for a decent life, the country will not face the risks of the virus only but it will face the risks of chaos.”

Other analysts said the crisis would test the patience and resolve of the country’s wealthy businesspeople who have limited means to absorb the economic fallout.

“What we had seen in Mnihla will be extended in the coming days to other districts and other cities,” said Nizar Bahloul, editor of the online Business News magazine.

“The seething anger is not from the needy only and those whose savings were depleted by the crisis. It affects also independent workers and professionals as well as owners of small enterprises and bosses of big companies,” he added.

Analysts warned that the current crisis could undermine the very survival of the nation’s crucial private sector, which is the main engine of the economy.

Estimates show that Tunisia has up to 500,000 small enterprises in the informal sector, accounting for around 40% of the country’s GDP and providing work for many of the 650,000 graduates who are officially unemployed.