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The International Monetary Fund freezes Saied: the 1,9 billion loan is postponed and now Tunisia risks default

According to the admission of the director general of resources and balances at the finance ministry, Ibtisam Ben Aljia, the country should mobilize as much as 1,47 billion euros from external loans

© Agenzia Nova - Reproduction reserved

by Alexander Scipio

A cold shower for Tunisia a few days before the legislative elections of 17 December, a symbolic date that marks the twelfth anniversary of the jasmine revolution which in 2010 triggered the movements of the Arab spring. The International Monetary Fund (IMF) has decided to delay the final approval of the maxi-loan of 1,9 billion euro scheduled for December 19. It is a problem, because now the chain of international financing necessary to avoid the financial collapse of the country risks blocking.

The motivation of the IMF is not clear. Perhaps the failure to publish the Finance Law for 2023 in the Official Gazette weighs heavily, which should contain the unpopular reforms desired by the Fund, starting with the gradual withdrawal of subsidies for basic products. Or the financial institution wants to distance itself from the controversial elections of December 17, wanted by the President of the Republic, Kais Saied, but boycotted by political parties and without candidates in several constituencies. The fact remains that Tunisia has "disappeared" from the Fund's agenda for the month of December. It should be noted that this situation occurs while Saied is in the United States for the US-Africa summit: probably a coincidence, undoubtedly an embarrassing circumstance for the head of state.

The "Washington Post" published a scathing article on December 14 entitled "Tunisian leader defiantly rejects US rebuke over democratic erosion", writing that "the country's status as an Arab Spring success story is narrow ally of the United States is in danger as its president consolidates power. In an interview with US reporters, Saied blamed the spread of "fake news" for Western criticism of his steps to strengthen presidential powers and denounced unidentified "foreign powers" who he said are fomenting opposition to his government. The newspaper quotes a senior State Department official as saying that the US administration supports Saturday's legislative elections, but will try to lead Tunisia down a "different path": "It is always about something more than the elections. It concerns the democratic spirit which must transcend the mechanism of the elections themselves”.

The Tunisian dossier also concerns theItaly for at least two reasons: i migration flows e the energy supply. The arrivals of migrants could multiply dramatically with the worsening of the socio-economic situation, reaching the peaks of 2014 (170 total landings by sea) and 2016 (180 arrivals by sea). Not only. The pipeline Transmed, also known as the Enrico Mattei pipeline, brings Algerian gas to Italy via Tunisia. And Algeria is now Italy's top gas supplier. Not to mention that the electricity interconnection project between Italy and Tunisia – for which Brussels recently approved a loan of 300 million euros – could act as a driving force for Italian investments in renewables in North Africa, transforming Italy into an “energy hub” for the whole of Europe. To this it should be added that this year Italy has become Tunisia's first commercial partner, overtaking France for the first time.

On the economic and financial front, Tunisia seriously risks collapse without the support of the Fund. By admission of the director general of resources and balances at the Ministry of Finance, Ibtisam Ben Aljia, Tunisia should mobilize 5 billion dinars (1,47 billion euros) from external loans by the end of the year. And without the first tranche of the IMF, creditors could back down, especially those in the West. the French president, Emmanuel Macron, for example, had promised last November a loan of 200 million euros to help the country, hoping however for a definitive agreement with the international financial institution. According to the Tunisian economist Aram Belhadj, there are not enough resources in Tunisia to finance the budget for 2023. “For all those who wonder why the President of the Republic has not yet signed the Budget Law for 2023 and been published in the Official Gazette yet, the answer is this: there are not enough financial resources for this budget. The same problem also persists with regard to the 2022 budget”.

According to the rating agency Fitch, Tunisia's public financing needs will reach 16,4 percent of GDP and 16,8 percent of GDP respectively in 2022 and 2023, driven by huge additional spending to absorb the shock of the war in Ukraine and by external debt maturities: i.e. 1,4 billion dollars in 2022 and 2,0 billion dollars in 2023. According to the Tunisian authorities, approximately 1,3 billion dollars of financing proceeds from Saudi Arabia, Abu Dhabi and Afreximbank are in the final stage of negotiations: this sum, together with the first installment of the IMF, should fill the funding gap for 2022. Tunisia is negotiating another loan of 1,8 billion dollars, mainly from of the Gulf Cooperation Council. Fiscal and external financing needs in 2023 are expected to be covered by planned disbursements by the IMF, multilateral and Western bilateral creditors (approximately $2,4 billion expected to be unblocked with IMF agreement) and the internal market financing.

Fitch identified risks in the political transition in particular. The parliamentary elections on December 17 should "bring greater stability to a new presidential regime with a simplified legislative process". However, several opposition parties such as the Islamic movement Ennahda or the nationalist PDL party have announced that they will boycott the elections, in response to the new electoral law approved by decree and which excludes party lists, rewarding individual candidates. This could lead "to social unrest fueled by inflation and high unemployment". Not only. Social pressures and the opposition of the powerful UGTT union "could also derail planned subsidies for essential products and state-owned enterprise reforms, which are key parts of the IMF programme." Historically, Tunisia's membership of Fund programs has been weak and "it is not yet clear whether the situation has changed" now that President Saied is in power.

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