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Tunisia turns to IMF to mitigate economic collapse

Najla Bouden's government negotiates with the agency to inject $4 billion into the Tunisian economy
Kaïs Saied

PHOTO/ Presidencia de Túnez via REUTERS  -   Tunisia's President Kais Saied

Immersed in a fragile political situation since President Kaïs Saied assumed full powers in July in a coup d'état, Tunisia is also going through a serious economic crisis marked by the collapse of its productive system. This unfavourable scenario has once again forced the country to request external aid, in this case from the International Monetary Fund (IMF), an organisation that has helped the North African nation in the past.

The government of Najla Bouden, the first woman to head the government of an Arab country, has been negotiating for weeks with the IMF for a 4 billion dollar assistance plan that would allow Tunisia to receive liquidity to mitigate the economic recession. The country was burdened with this burden even before the revolutionary outbreak of 2011. His predecessors were forced to take the same decision. Specifically, on two occasions after the revolution, both with little success.

Talks to seal a new deal are still at a preliminary stage, despite the version of the governor of Tunisia's central bank, Marwan Abbasi, who claimed in December that the pact was close to being concluded. The Tunisian authorities are optimistic that they will once again receive much-needed economic assistance, which could alleviate the precarious social situation, and hope to reach an agreement during the first quarter of the year.

Fondo Monetario Internacional
AFP/MANDEL NGAN  -  The seal of the International Monetary Fund (IMF) is seen outside a headquarters building in Washington, DC

The International Monetary Fund's version differs greatly from the government's perception. The IMF demands a series of 'immediate and profound' reforms to address the weaknesses of Tunisia's economic system, which has been weighed down by decades of corruption, the proliferation of clientelistic networks, excessive bureaucracy and a complete lack of state planning.

The IMF's main criticisms focus on the country's bloated foreign debt and the excess of public sector jobs. According to official figures, Tunisia has 700,000 civil servants in a country of some 12 million people. A volume of workers dependent on the treasury that absorbs 70 per cent of the state's resources, and with high rates of absenteeism.

In this regard, the influence of the country's largest trade union, the UGTT (Tunisian General Labour Union), has been notable since the outbreak of the revolution. Its constant mobilisations have achieved a large part of the demands set out above, extending social gains to the detriment of the productive capacity of the various economic sectors. This is an issue on which the IMF has demanded reforms.

These changes would affect the state's capacity to reduce personnel, the system of subsidies and aid, and public debt. On this last point, the data reveal that debt levels in 2021 reached approximately 100 per cent of Tunisia's gross domestic product (GDP). These are devastating figures that reflect the magnitude of the problem.

Jerome Vacher
PHOTO/AFP  -  Jerome Vacher, International Monetary Fund (IMF) envoy to Tunisia

The IMF's last permanent representative in Tunisia, Jérôme Vacher, endorsed the IMF's prescriptions, declaring in an interview with AFP that Tunisia's public services sector is "one of the highest in the world". And that it should be reduced. The country's main problem, however, is the country's strong inequality, where narrow circles of power have been running the national economy for decades.

Before issuing his verdict, Vacher said he wanted to "know the intentions of the authorities in terms of economic reforms, because very deep structural reforms are needed". The IMF does not want to intervene again in a country where it has already intervened twice without progress. It would set Tunisia up for another failure.

The COVID-19 crisis only aggravated the situation, pushing the unemployment rate to 18% and pushing more than half a million people below the poverty line. It is, in Vacher's words, the biggest economic recession in Tunisia since independence in 1956. However, he stressed that the problems are not new and that they are framed in a context prior to the fall of the dictator Ben Ali. Some blame the troika government led by the Islamist Ennahda in 2012 for over-indebting the country.