Saudi Arabia to help Sudan reduce debts of UAE, Kuwait, China and Japan
TUNIS: Tunisian politicians and officials warn of an economic collapse if the government cannot accept a new loan from the International Monetary Fund (IMF) this summer, but political paralysis could seal that effort.
Tunisians are used to last-minute financial talks that pit the demands of foreign lenders against public opinion, but this time a power struggle between the president, prime minister and parliament has added further complications.
“The political situation is blocked in Tunisia,” said former Prime Minister Youssef Chahed. In an interview with Reuters, he said that “there is no serious debate” in the political class on fixing the economy.
After the COVID-19 pandemic slashed output by 8.8% last year and pushed the national debt down to 91% of gross domestic product (GDP), the stakes are high and urgent.
Central Bank Governor Marouan Abassi told parliament last week that if the government tried to use the bank to finance the deficit instead of making a deal with the IMF, inflation would hit triple digits in one ” Venezuelan scenario ”.
Former Finance Minister Hakim Hamouda told Reuters the crisis “threatens to bankrupt the state” and former Reform Minister Taoufik Rajhi, who negotiated a previous IMF loan for Tunisia, said the officials said. “last chance to avoid impending collapse” talks.
Both warned that Tunisia could face the fate of Lebanon, where the currency has fallen and the economies have been wiped out, leading to social unrest.
An IMF program can unlock more financial support to help support the Arab Spring’s only democratic achievement – and an important security and migration partner for Europe.
Tunisia’s 2021 budget forecasts borrowing needs of $ 7.2 billion, including about $ 5 billion in foreign loans. It places debt repayments at $ 5.8 billion, including $ 1 billion due in July and August.
Talks with the IMF are expected to last all summer. Prime Minister Hichem Mechichi told Reuters he wanted $ 4 billion, although few believe more than $ 3 billion is likely.
A bilateral loan may be required to meet summer debts. Tunisian politicians say privately that Qatar or Libya can provide the money.
Diplomats say international goodwill for Tunisia could gain leeway in the talks. But they are also frustrated with what they see as chronic under-spending, and the IMF wants Tunisia to come up with credible reforms.
Chahed said foreign support, especially from the United States and France, increases the chances of a deal, but only if Tunisia can commit to change. “We must quickly take advantage of this context and immediately present a detailed plan,” he said.
But the main reforms – cutting subsidies, restructuring public enterprises and reducing the public sector wage bill – are opposed by the UGTT union and some political parties who say Tunisians are fed up with the seemingly endless sacrifices.
Public discontent manifested itself in the 2019 election with the rejection of established politicians, and more recently in January, protests that could foreshadow the response to new economic problems.
Such internal divisions will prevent the government from guaranteeing the fund and other foreign lenders that it can implement the reforms it promises.
When elements of its proposal to the IMF leaked this month, the UGTT said it was unaware of the details and rejected them, contradicting previous statements by the government that they had struck a deal. on reform.
A deal must be approved by the deeply fragmented parliament, where Mechichi’s government is backed by a slim majority, but in which no party holds more than a quarter of the seats.
It is also expected to be signed by President Kais Saied, who disagrees with Mechichi and the speaker of parliament. He blocked a reshuffle proposal and rejected the assembly’s efforts to appoint judges to the Constitutional Court.
Disputes within parliament, and between it and Saied, have already delayed efforts to resolve the budget problem. Last year, Tunisia had three separate governments and therefore was unable to start talks.
“If we had started earlier … we could have had an easier negotiation,” said Chahed, the former prime minister.