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Delay in drawing up budget is bad signal to investors,

Economic expert Walid Jaafar proposes urgent and vital solutions to manage the delay in drawing up the state budget for 2012 and unblock a situation marked by ongoing protest movements and social claims in different regions of the country.


A few days are left before the New Year and the State budget has not been adopted yet?

The delay in adopting the state budget will lead to a delay in the release of all that relates to capital expenditure which represents growth relays. We will eventually end up in a situation where expenditure to be made will only be operating expenditure (salaries, operating costs).

But all that is strategic spending will be deferred until the final adoption of the budget.

In fact, by lagging behind in adopting this budget, there will be a delay in the deployment of investment and a lag in the beginning of solving big problems.

Thus, the growth forecast for 2012 will not be realized. But how can we catch up?

It will take one or two months to adopt the budget. A speedy process need to be adopted in the commitment of capital expenditure. So we must take extraordinary measures to make investments. Indeed, we know very well that the process of setting up investment expenditure and the choice of contractors requires a little time. It would be probably useful to think of special measures for 2012 that will allow for more flexibility in the release of capital expenditure. In my opinion, it is the only solution.

In fact, some think it is important to begin discussion of the state budget just for the first 6 months of 2012 to better define the priorities. What do you think?

I would not be in favor of drawing up the budget for the period of 6 months. Like all countries, a state budget is usually prepared for one year except in exceptional situations. An example is when there is a blockage in the composition of the Government. In this case, there are special measures for each release.

Moreover, the law on organization of provisional powers provided that if the state budget is not drawn up, the president authorizes expenditures for a quarter. This is not a good sign for foreign investors and local stakeholders in the country.

In fact, drawing up a budget for six months means enhancing the idea of the temporary and that there is no visibility for the next 6 months. So an investor will not be engaged on the basis of fiscal and budgetary measures that are only for six months.

What about the action program presented by Prime Minister Hamadi Jbeli at the announcement of his new team to the Constituent Assembly?

Only the general lines were announced. There are no specific measures or detailed choices. This is just to fight against unemployment, reach a growth of around 4%. For this figure, I think it is not a realistic rate.

In comparison with Morocco that has not experienced such a revolution, and which has benefitted of the flight of investors due to the instability in Tunisia, in addition to creating large-scale projects such as the Morocco Mall, and that had expected a growth rate of 4% or even 4.5%, is it logical to say that the new Tunisia achieve the same rate announced by Morocco? I think the announced rate is an imprudent one where there is some optimism from the fact that Libya will contribute to the revitalization of economic activity in Tunisia.

We cannot be certain of this contribution especially since decision-making centers are not clearly identifiable.

On another level, we have not seen urgent and vital measures regarding tourism, for instance, which is one of the main vectors of economic development despite the announcement of a campaign dedicated to the promotion of this sector. This kind of action is insufficient given the political climate of the country. For this purpose, we must act by focusing on the security aspect and giving clear signals to reassure our foreign customers and above all conducting a structural reform.

As an expert, what are the steps needed to remedy this situation and especially to promote another sector, that of banks which is experiencing difficulties hindering its development?

Before tackling the subject of the banking environment, it is essential to clarify the challenges we are facing. Although the situation is complex, the decisive factors are very clear: a high unemployment rate of around 20% by end of 2011, the current account balance where deficits are widening.

With these two issues, there is a very tight liquidity in the banking sector.

The central bank continues to inject money to the banks to grant loans. There are also the foreign exchange reserves that are declining. This is the problem that arises now.

How to solve unemployment? There are easy ways but that will certainly penalize the future of the country especially in the public service. It should be noted in this regard that there is a paradox in the choice of the government by appointing a ministry for public administration reform and by considering on the other hand the administration as a tool to help address the spectrum of unemployment. These two orientations cannot go together. It’s a bit of demagoguery.

So what to do to remedy that?

It is important to boost private investment whether local or foreign.

To stimulate domestic entrepreneurs, it is important to establish a Transitional Justice in order to restart from a solid foundation. Another thing, the tax amnesty is very important to help those who have tax problems to see the release of their debts. The amnesty exchange remains fundamental for those who are abroad to repatriate their money. A move that could improve the level of stock in foreign currency in Tunisia

As for foreign investors who see only the competitive advantages, the Ministry of the Interior is required to enforce the law with respect to the multiplication of strikes and sit-ins. Even with the slogan “Invest in democracy”, foreigners will not invest in a democracy where its climate does not bring productivity.

With the international crisis, the logic is the compression of cost and meeting deadlines and all elements that promote productivity. Our current climate does not encourage productivity. So, how to have competitive advantages? It’s not easy. Note that there are positive signals from which one might be optimistic. Exports have been penalized but regarding certain sectors such as textiles and electronic and mechanical industries, there are some very interesting growth rates. Perhaps, it is necessary to bounce off these areas to act even more.

Regarding the monetary sphere, there is a monetary theory saying “generally, the production is stable and when the money supply leads to higher prices” is that explains inflation in Tunisia? Note that there are many injections of money today. Credits are changing in banks at rates that are around 18% in 2011.

Some experts predict that inflation is the mismatch between changes in money supply and the production of wealth in the country. While Hechmi Alya explains inflation as supply and demand and the structure of our products “inflation is a monetarist phenomenon” and added, “if we balance the supply and demand, the phenomenon of inflation would be largely resolved. ”

The whole question now concerns the financing of the economy in 2012 especially with the announcement made by the Governor of the Central Bank on ways that have reached their limits. For more details, if the Central Bank continues to inject Tunisian dinars in the banking sector, money supply will increase and currency in circulation the country will be increased.

However, there are currencies that are stagnant and declining. The exchange rate should be aligned to that and the value of our currency will fall. Consequently, imports will be more expensive, the structure of cost of our companies will increase and companies will no longer be competitive. On the domestic front, inflation will increase.

Several questions arise in mind: what the BCT will continue to inject is likely to affect the value of our currency? So it’s not a reasonable choice. Are we going to lower the cost of the money market to reduce the level of financial charges of the companies by allowing them to revive? The monetary rate cuts will boost monetary credits?

So I think that the state will probably raise the funds at both domestic and external levels because we have no choice to meet our deficit and restart the economy. We need additional resources (resources from abroad and benefit from cooperation agencies by directing them to investment) rather than artificial resources. Why not have an idea of a domestic borrowing like the one recommended in France with a rate of about 2% to be slightly higher than that of savings.

And what about the independence of the Central Bank?

The independence of this structure is important in that it preserves the global balances of the country. It can never be exploited, but there will always be coordination between the monetary authority and the executive. Governance requires the appointment of a Governor for a fixed period, during which he would be untouchable.


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