Tunisia’s prime minister vows to forge ahead with reforms despite trade union’s opposition

Chahed appears to have bolstered his political standing.
Sunday 01/04/2018
Tunisian Prime Minister Youssef Chahed addresses parliament, on  March 23. (AFP)
Defending the ‘R’ word. Tunisian Prime Minister Youssef Chahed addresses parliament, on March 23. (AFP)

TUNIS - Tunisian Prime Minister Youssef Chahed pledged to forge ahead with bold reforms despite the country’s political and economic challenges.

The International Monetary Fund (IMF) disbursed a $257.3 million instalment loan to Tunisia on March 23 as it endorsed Chahed’s government’s difficult progress in carrying out reforms.

The disbursement will relieve the government’s financial strains, including dwindling foreign currency reserves, and send a positive signal to capital markets as the government prepares to tap investors abroad in buying into its planned sale of a 1 billion euro ($1.23 billion) sovereign bond this year.

Chahed, however, received no respite from his opponents, especially the powerful Tunisian General Labour Union (UGTT), whose leader, Noureddine Taboubi, called on the prime minister to “step down because you had failed. The country’s situation needs immediate results.”

“You have picked a fight with the UGTT and we will lead this social battle to the end whatever the costs,” Taboubi warned in response to Chahed’s underscoring the country’s needs to implement painful reforms, including selling of state-owned firms.

“In reality, everybody agrees on the (economic situation) diagnosis but when implementing these reforms, special interests stand in the way,” Chahed told parliament on March 23 in his most spirited defence of reforms.

“The time of reforms has come. There is a price to pay for carrying out reforms and we are ready to pay the price,” he said.

He cited the need to nurse back to financial health two state social security funds that together are losing about $41 million a month. He mentioned the necessity to fix the deficit of state companies, which posted total financial losses of $2.7 billion in 2016, more than the equivalent of the annual state investment spending for basic infrastructure and other development projects.

Financial experts said Tunisia faced a serious quandary. It has either to sell state assets to collect funds to cut budget deficit or plunge further into foreign indebtedness, which would weaken its creditworthiness in international capital markets.

Rating agency Moody’s Investors Service downgraded Tunisia’s already junk credit rating in March to B2 — five levels below investment grade — citing its deteriorating fiscal balance sheets. Such an assessment is bound to complicate the government’s plans to borrow money on foreign capital markets.

In explaining its March decision, Moody’s cited Tunisia’s further erosion of fiscal strength and the thinning of its foreign currency reserves. Tunisia’s debt burden makes it vulnerable to shifts in foreign creditors’ willingness to finance its borrowing needs, Moody’s said.

“The state must privatise non-strategic sectors. With the earnings from the sell-offs, the government can invest in upgrading health, education. I’m not a supporter of ultra-liberal market economics but the pure version of state welfare economy had failed across the world,” said Chahed.

“The privatisation of state companies is a red line. The UGTT will fight to protect the interests of the popular masses,” said Taboubi.

Chahed claimed the high political ground in his struggle with his adversaries citing a political saying often repeated by his main political protector, Tunisian President Beji Caid Essebsi.

“The difference between a politician and a statesman is the first thinks about the next elections when the latter thinks about the next generations,” said Chahed.

Financial expert Houcine Ben Achour said: “The IMF disbursement is a true breath of fresh air pending the next financial suffocation. The situation raises the issue more than before whether there is any choice between privatisation and borrowing to satisfy the needs of the state financial capacities.”

“Choosing between the easy way of debt that puts more burdens for the future and the difficulty of selling state assets. We have to decide very clearly now rather than tomorrow,” added Ben Achour.

Political analysts said Chahed appears to have bolstered his political standing but it is not clear whether he will have time to implement his reform agenda.

“Chahed is supposed to be in a precarious position as the UGTT and Nidaa want him to step down immediately; he has paradoxically his hand freer now than before,” said Nizar Bahloul, manager of the online magazine Businessnews.

Nidaa Tounes, the secularist party founded by Caid Essebsi and headed by his son, Hafedh, is not offering solid support for Chahed.

“If he (Chahed) survives, he will be credited with success in resisting the trade union to pursue reforms until the presidential elections in 2019. If he quits soon, he will be seen as the leader who dared fight corruption and started deep reforms needed for the country’s salvation,” Bahloul wrote in an analysis.

“Tunisians will remember his work in the 2019’s elections,” he added.

Chahed, the youngest prime minister of Tunisia in 60 years, has been ambivalent about his candidacy for president. He is mum about his political plans even when parties supporting his government urged him to drop any claim to run for president in 2019.

For now, Chahed will have to make sure first that municipal elections take place as scheduled May 6.

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