Tunisia Says It’s Now or Never for Painful Economic Overhaul
(Bloomberg) -- Tunisia’s finance minister said he’s fully committed to taking unpopular steps to salvage the economy before resuming loan talks with the International Monetary Fund, just weeks after protests over entrenched unemployment and poverty showed the depth of public anger.
“Things will get better in Tunisia because this government has decided to take action,” Ali Kooli told Bloomberg Television.
“Some of those actions aren’t easy to take” but would eventually change the economy “deeply,” he said without giving details. “We will see the fruits in very few weeks.”
In the meantime, authorities are considering a maiden sovereign sukuk issue or turning to financial markets in the Middle East, Asia or even the U.S. to help plug a budget deficit projected at between $4 billion and $5 billion in 2021, said Kooli, 56, a former banking executive.
The state news agency TAP later reported a government proposal to reduce working hours for state employees in order to cut public spending.
Tunisians have heard such promises before. The North African nation has had more than 10 governments in the decade since a wave of protests toppled President Zine El-Abidine Ben Ali in 2011 and rippled across the region.
The political instability has hampered efforts to reduce youth unemployment and corruption, key drivers of the revolt, while repeated terrorist attacks had slowed the crucial tourism industry even before the Covid-19 pandemic depressed global travel.
The demonstrators from mostly urban, working-class backgrounds who took to the streets across much of the country last month had legitimate grievances, Kooli said.
His comments echo those of Prime Minister Hichem Mechichi, who at the height of the protests said he “understood the anger and frustration of the youth,” while deploying the army to halt the looting of shops and banks and attacks on public buildings.
Mechichi renewed pledges made by previous premiers to cut subsidy spending, sell state companies and provide more financing for young Tunisian entrepreneurs.
But the powerful UGTT trade union, which is more aligned with President Kais Saied than Mechichi’s government, is officially opposed to divestment of state assets and has in the past threatened to take to the streets if subsidies are touched.
The recent arrest of Nabil Karoui, founder of the Heart of Tunisia party, on graft and money-laundering charges has also exposed cracks in the government coalition at a critical time for reforms.
The IMF in January urged Tunisia to cut spending on salaries and handouts to help rein in the budget deficit it forecast could reach 9% of output in 2021 without reform.
“It is essential to strictly prioritize spending on health and social protection, while exerting control over the wage bill, ill-targeted energy subsidies and transfers to state-owned enterprises,” the lender said after annual consultations with Tunisian officials.
Tunisia’s central bank on Wednesday extended a months-long interest-rate pause and called for a program of structural reforms supported by all national stakeholders.
That would be “a positive signal to lenders and international ratings agencies, facilitate access to international financial markets and mobilize foreign resources,” the regulator said in a statement.
Tunisia’s next step “will be to really deliver some reform,” Kooli said. “I am pretty much confident that we will start constructive discussion with IMF, and we will certainly end up with common views.”
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