High interest rates, pandemic, and government borrowing that ballooned in recent years have left many developing economies mired in debt crises, especially in North Africa. As IMF World Bank meeting takes place in Africa for the first time, officials will look at ways to help countries claw their way out of this.
Tunisia, as you know, is facing full-blown economic crisis. Multiple shocks since a 2011 revolution have brought the country to its knees. Credit ratings agencies predict that Tunisia could default.
As it’s known, President Kais Saied has slammed the terms required to unlock a $1.9 billion IMF loan as “diktats” and rejected 127 million from the European Union as too small.
Experts predict that Tunisia will have to negotiate for an IMF deal and even though the president slammed IMF “diktats” he is slowly overseeing some changes.
Ghazi Ben Ahmed, Founder of the Mediterranean Development Initiative (MDI), a Tunis-based think-tank founded in 2013 to help support economic and social development in the Mediterranean region, said:
“It is interesting to notice that Tunisia is already implementing some of the IMF’s de facto recommendations (austerity measures). The channel for negotiations with IMF is still open and the most important question is the content of a new IMF supported reform programme.
“There is a broad agreement between IMF and the country on key elements of reforms. It is on details of implementing reforms that work still have to be done.
“Italy insists on an unconditional IMF loan to Tunisia. US remains unwilling to grant IMF funds to Tunisia prior to economic reforms, so the Tunisian Government have to prepare a revised reform plan to the IMF.
“Tunisia is clearly facing tough choices. It will have to find its ways to create a more inclusive and sustainable model of market economy, so that Tunisians feel they have a real economic opportunity; curb populist disinformation and encourage a healthier exchange of ideas
“In my view, Tunisia must follow the Greek example with a joint EU/IMF program of reforms. Greece just paid off in 2023 the last IMF loan since the country’s financial crisis began in 2009. The US and the EU must use their leverage to push for economic reforms through EU/IMF joint program.
“The key for success and efficient implementation of these measures is to involve the private sector and the civil society. This means also ensure a space for NGOs and protect them.
“Some measures may sound nice but are unrealistic and difficult to implement in an environment plagued with massive corruption and bad governance, such as measures that include restoring the progressivity of the income tax system, investing in the tax collection authority’s capacity, and reducing tax exemptions afforded to large corporations.
“A bold measure would be to tackle economic rent and monopolies, as well as privatizing inefficient public firms (most of the 104 public firms are losing money).
“Another measure would be to target food subsidies to low-income people. Tunisia could be launching a pilot program in a couple of regions to ensure a smooth implementation.