IMF loan unlikely to save Tunisia’s economy

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Questions are being raised across the political spectrum if I long delayed from Tunisiainternational Mmonetary Fand the loan will have the positive impact that many hope for. Other Observers fear that it is too little, too late to save Tunisia’s drowning economy.

This would be Tunisia’s third loan deal with the International Monetary Fund (IMF), often referred to as a lender of last resort. The country currently owes the IMF $2.01 billion. Many fear that with or without the loan, Tunisia’s road to recovery will be rocky, especially since Moody’s has already said it will review and possibly downgrade Tunisia’s current Caa1 bond rating, flagging it. as a high default risk country.

The increasingly popular Tunisian far-right Free Constitution Party (PDL, Parti Destourien Libre), led by Abir Moussi, went so far as to write a letter on Oct. 24 to the director of the IMF, following the agreement at the level of services to lend 1.9 billion dollars to Tunisia. (This decision is not yet final.)

Moussi warned that Tunisia was currently in no condition to accept a new loan deal and demanded greater transparency. No agreement should be signed that “citizens have not seen or discussed democratically within the relevant legitimate institutional frameworks”, she said.

Economist and professor Elyes Jouini of Université Paris-Dauphine PSL is cautiously optimistic, told Al-Monitor this the agreement “corresponds to the condition set by several partners of Tunisia before considering bilateral funding. Thus, IMF financing should open the door to other financing.

For Jouini, how the loan is used is key to creating effective growth and recovery. Economic reforms should target “those who should benefit from cash transfers, (like) the socially disadvantaged classes”, he added. “It is not easy.

Previous economic reforms in Tunisia, such as the removal of subsidies, have led to major civil unrest, but they remain a key IMF demand. “Reforms too abrupt could lead to strong social instability,” Jouini said, but “reforms implemented too timidly could lead the IMF not to continue its support. … The budgetary room for maneuver resulting from the reforms must be invested to create growth.

Political commentator Haytham El Mekki does not share Jouini’s optimism. “I don’t think the government will be able to deliver on its promises to the IMF, especially under increasing social pressure,” he said. The proposed loan would be disbursed over four years, and “I’m afraid the first part of the loan will be the last we receive”.

According to data site Statista, Tunisia’s debt to GDP ratio has risen sharply over the past three years. From its pre-pandemic level at the start of Kais Saied’s presidency of 68.97%, it has risen to 87.92% this year.

Mekki isn’t convinced that more borrowing is the way to go. “According to the IMF itself, if we continue on this path, we will reach 100% (debt to GDP) by 2025. Our debt is growing,” he said.

Aymen Bessalah, a Non-residential researcher at the Tahrir Institute for Middle East Policy, recently published an article outlining Tunisia’s challenges. He asked Al-Monitor rhetorically, “Once the government gets all the loans it needs, what do they do with that money?

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