As Tunisia works to secure a US$1.78 billion loan from the International Monetary Fund (IMF) to cover next year's budget, the government has ignited anger across the country raising taxes and cutting subsidies at a time when the economy is struggling to recover from the country's Arab Spring uprising.
The country has relied on foreign assistance to finance its budget since the revolution two years ago that toppled the rule of Zeine el Abidin Ben Ali. In addition to the IMF money, the country has recently benefited from two US$500 million loans from the World Bank as well as grants and loans from Qatar, the African Development Bank, the US government, the EU, Turkey and the French Development Agency.
Tunisia's economy is stalled thanks to the impact of its 2010 uprising. Unemployment is estimated at 17 percent, but in the poor regions of the country's interior, the rate ranges from 30 to 40 percent. The tourism industry, which accounts for a sixth of the workforce, has been badly hit by the unrest which followed the assassination of opposition leader Chokri Belaid.
Meanwhile, the inflation rate has recently reached 6 percent, the highest figure in seven years.
Negotiations for a precautionary Stand-By Arrangement are ongoing at a technical level with the Tunisian authorities. As you noted, a new government has been formed and staff is now inquiring about its intentions and mandate. In any case, the IMF continues to stand ready to help Tunisia in any way deemed necessary during this difficult political transition process.
A number of Tunisian netizens feared that the IMF loan will result in painful reforms, making the country's economy worse. Mariem Ben Abid, founder of the Arab Governance Institute, is one of them. She argued:
In order to secure the loan payment, the IMF suggests their classical set of “structural reforms,” which certain experts call “painful reforms” due to their negative impact on the economy and the standard of living in Tunisia(…)There is a need for a gradual reduction of subsidies that constitute five percent of the gross domestic product (GDP). This will result in an increase of fuel prices and consequently, transportation costs. This will ultimately lead to a general increase of market prices… Because of a potential increase in the taxes on the value added tax (VAT), this could result in an increase in the market prices and eventually undermine Tunisians’ standard of living, since salaries will not see the same increase, especially given that the inflation rate is already about nine percent.
Ben Abid believed there are other measures the Tunisian government could take to avoid borrowing from the IMF:
Control of tax evasion and tax audit for businessmen who have a reputation of corruption associated with the Ben Ali clan.
More transparency in expenditure and state revenue, including national and international calls for bids and energy revenues.
Substantive reform to limit corruption, which has increased according to several national and international studies, as well as the implementation of good governance measures.
Initiate an audit to find the money borrowed during the Ben Ali era. This will help trace back the destination of misappropriated funds and maybe recover a part of them.
Creation of new trade agreements with Africa and the Maghreb to reduce dependence on Europe (eighty percent of our foreign trade exchange) and to soften the impact of the European Union crisis on our economy, while accelerating the reform of the customs which has become, according to the testimony of several exporters, a serious economic constraint since the revolution.
Strengthening security in order to rebuild the tourism sector.
In order to raise awareness about these “painful reforms”, award-winning blog Nawaat, made the following video:
In it, the video has the following message [fr]:
La Tunisie va emprunter 1.78 milliard de dollars au FMI
Le FMI exige une réforme douloureuse pour assurer le remboursement de son crédit
Nous passerons 40 ans de notre vie à travailler pour payer l’ensemble de ces dettes
Non à l’hypothèque de deux générations
Non à la suppression des subventions (pain, farine, médicaments, livres, transport …)
Non aux privatisations sauvages.
Non a l’endettement auprès du FMI
Non à l’augmentation des prix, de la TVA sur les produits et services
Oui à l’audit quant à l’argent emprunté sous Ben Ali.
Oui à l’étude et a l’audit par l’ANC des l’emprunts passés et à venir.
L’enseignement et la santé doivent rester accessibles à tous
Défendons, ensemble, la Tunisie, ses richesses et son avenir !
Tunisia will borrow a $1.78 billion loan from the IMF.
The IMF requires a set of painful reforms to ensure the reimbursement of its loan.
We will spend 40 years of our lives working to pay these debts.
No to the mortgaging of two generations.
No to the suppression of subsidies (bread, flour, medications, books, transportation…)
No to ferocious privatization.
No to borrowing from the IMF.
Yes to an audit into the money borrowed under the Ben Ali rule.
Yes to reviewing and examining past and future loans by the NCA [National Constituent Assembly].
Education and healthcare should remain accessible to everyone.
Let's together defend Tunisia, its wealth and future!