Tunisia has reached a preliminary agreement with the IMF on a $1.9bn loan designed to help alleviate the North African economy plagued by food and fuel shortages.
The deal, which was announced late on Saturday and is yet to be ratified by the IMF board in December, is expected to open the door to loans from other donors awaiting the reassurance that the heavily indebted country was committed to reforms, which form part of the package. Before the agreement, some analysts were predicting Tunis would not be able to meet its debt repayments and would likely default.
This will be the third agreement between Tunisia and the IMF since 2013 and diplomats have warned in recent months that the country has failed to implement previously agreed reforms. These included reducing subsidies, privatising state-owned enterprises and cutting civil service wage cost, which is seen as one of the highest in the world relative to the size of the economy.
The Tunisian government had “already taken steps to contain the civil service wage bill and started to gradually phase out generalised wasteful price subsidies”, the IMF said on Saturday.
It said the loan would help Tunisia restore fiscal stability, “enhance social protection and promote higher, greener and inclusive growth and private sector-led job creation”.
Elements of Tunisia’s reform programme include increasing targeted cash transfers to the poor and expanding the social safety net for vulnerable families affected by price rises, according to the IMF. The government is also committing to reforming state-owned companies.
Earlier this month, long queues of cars formed outside petrol stations as a result of fuel shortages attributed to the rationing of foreign currency by the central bank.
Kais Saied, the president who rules by decree and has changed the constitution in the summer to gain extensive powers, has accused speculators and hoarders of stockpiling commodities and manipulating the market to make huge gains.
Until Saied suspended parliament last year, Tunisia was seen as the only example of a successful democratic transition to have emerged from the Arab uprisings of 2011. Many Tunisians said at the time that they supported his move because the democratic experiment failed to stem economic decline and rising prices.
But the country’s economic woes have worsened since, as Russia’s full-scale invasion of Ukraine placed increased strains on Tunis’s budget by fuelling steep increases in the prices of food and petrol imports.
Commodities such as sugar and vegetable oil have been in short supply. Recent video footage that went viral showed customers jostling each other at a supermarket in order to seize scarce packets of staples.
Source: Economy - ft.com
