January 07, 2018

Tunisians unnerved by price hikes in election year

Officials seem unable to stop price hikes expected in 2018 to affect nearly all commodities.
Tunisian women at a vegetable market in Ettadhaman city, near Tunis. (AFP)
Shopping blues. Tunisian women at a vegetable market in Ettadhaman city, near Tunis. (AFP)

TUNIS - With municipal elections looming in May, Tunisian government and political party leaders are increasingly sensitive to popular discontent over the erosion of living standards that risk further deterio­ration when price increases and tax hikes go into effect this year.

Tunisian Prime Minister Youssef Chahed pinned hopes on the months ahead. He told a state tel­evision interviewer on January 1: “If we succeed in the year 2018, all the difficulties of the previous years will be left behind us,” he said.

There is reason for optimism on the economic front in Tunisia. Tunis stock market shares yielded 14% av­erage gains last year compared to 2016, the bourse’s data indicate.

The production level of phos­phates, Tunisia’s main export commodity, increased 24% in 2017 to more than 4 million tonnes. Gafsa Phosphate Company senior marketing official Hafedh Ben Yahia said he expected “phosphate produc­tion to expand to 5.6 million tonnes in 2018, if there is no disruption by strikes and other social protests, especially in key production areas.”

Revenues from tourism, another key foreign currency earner, grew 19.6% during the last year, helping bolster foreign currency reserves to $5.3 billion for the equivalent of 96 days of imports, figures from the Central Bank indicated.

The deteriorating value of the dinar last year, compared to major Western currencies has, however, offset such profits.

Tunisia’s olive oil output for the 2017-18 season is expected to be three times higher than the previ­ous harvest, with an output of about 260,000-280,000 tonnes, the Agriculture Ministry said.

Government leaders cite those trends as indicators of what should allow for further economic re­covery in 2018 if so­cial and political stability contin­ues and security issues are controlled.

The government said it expected 3% economic growth for this year compared to 2.2% in 2017 and an annual average of 1% from 2011-16.

However, officials seem unable to stop price hikes expected in 2018 to affect nearly all commodities as it implements a budget marked by higher taxes intended to balance the country’s finances, which had been burdened by government high spending.

That spending caused the budget deficit to widen and led to inflation that contributed to the weakening of the dinar. This gnawed away at the purchasing power of most of the population.

The inflation rate declined from a previous average of 5% to 3.7% in 2016 but was 4.45% last year. Inflation is predicted to be 4.3% in 2018.

The budget deficit widened to 6.8% in 2012 from 2.6% in 2010. The government budgeted for a 4.9% deficit from an estimated 6% in 2017 and 5.4% the previous year. Budget spending rose to 33.6% of Tunisia’s GDP in the most recent fiscal year, compared to 28.4% in 2010.

“It is important that the govern­ment brings back the budget to less than 30% of GDP, the threshold that is considered the limit which the country can afford,” said the Hedi Nouira International Centre, a Tunisian think-tank.

Experts said big state spending reduces the govern­ment’s financial abil­ity to intervene and alleviate the effects of price rises on the poor and middle class.

“Almost all products are set to rise this year. Dozens of goods’ prices are pushed higher as a result of the in­creased value added tax, rising cus­toms duties or increased consumer taxes,” said economist Marouen Achouri.

“With this budget bill, buying a house even of substandard quality will be quite a feat and car prices and consumer goods’ prices will increase. As a result, the modest Tunisian dream of owning a home and buying a car is knocked down as it becomes increasingly out of reach for more and more people.”

Parliament member Jilani Ham­mami, whose leftist Popular Front urged Tunisians to prepare for peaceful protests to force the gov­ernment to rescind the financial law, said: “Citizens are unable to bear the hardships caused by the price rises. Tunisia has become hell on Earth.”

“Prices of all goods and products without any exception will increase because of the 2018 budget bill as taxes increase and because of the impact of domestic petroleum prod­ucts price increases,” said financial expert Ezzeddine Saidane.

He said he expected price increas­es in domestic petroleum products as the government tabled on an aver­age oil price of $54 per barrel for this year. Prices on international markets have been higher than that recently.

Political analysts said they feared rising prices could adversely affect voters’ trust in the political process.

Mindful of apparent voter apa­thy displayed during a by-election in December, when only 5% of reg­istered voters participated in a poll for which they were eligible in Ger­many.

Chahed, the Tunisian prime min­ister, has urged parties to be more responsive to the population’s de­mands.

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