We would have liked to find this type of analysis on the website of the Tunisian Ministry of Finance, explaining to the population the economic ins and outs of the crisis of the Russian war in Ukraine on Tunisia. Asking such a thing from a ministry that does not even publish since November 2021 figures about the results of execution of the budget is indeed unnecessary despite the remarks to the minister itself, which are still at the stage of the simple call for the creation of a crisis cell.
This kind of notes and more, is already found in the newsletter (NL) of the economic department of the French Embassy in Tunis, whose head already encrypts the damage to Tunisia, which she estimates to at least TND 5 billion and the loss of a point of growth in 2022, for the component of fuels. These figures are not yet found in any official Tunisian document.
Major risk on food security for Tunisia
In his latest analysis, namely this NL, Cyril Morée assistant to the head of the economic department writes that “the Russian-Ukrainian crisis represents a major risk to food security and energy of Tunisia.
The analyst noted that “though, according to the government, grain stocks cover the needs until June, the risk of shortage threatens beyond, given the extreme tensions on the international supply and solvency of Tunisia. The lack of a coherent agricultural policy, the under-exploitation of land and low profitability have led to an under-exploitation of agricultural potential and a high level of external food dependence.
Cyril Morée noted that “if the Tunisian Grain Office says it has made advance purchases, storage capacity does not exceed three months, allowing to ensure needs until June. The local collection of durum wheat should initially take over in the summer, but tensions will quickly be felt on the supply of soft wheat and barley, especially since the Tunisian Grain Office, in charge of purchases, is a counterparty almost insolvent.
Tunisia will have more and more difficulty in buying gas
For the energy component of the impact, which is direct because financial, of the crisis of Putin’s war in Ukraine, the French analyst recalls first that “the recent recovery of domestic energy production after a long decline and the fee on the transit of Algerian gas does not dispel the fears about Tunisia’s ability to get energy supplies. Supporting figures, Morée believes that “Tunisia will find it increasingly difficult to buy at current prices given the state of its public finances and the financial situation of public companies in charge of supplying the market (STEG and STIR).
The assistant of the economic department of the French embassy in Tunisia estimates then, that “the crisis threatens more globally the external balances of the country”. Describing the effect, already proven on the Tunisian food balance, the rise in food prices, Morée believes that “the trade deficit could further widen by the depreciation of the dinar against the dollar (-3.5% in one month to 2.96 TND / USD). For him, “the current account deficit should therefore deteriorate beyond the scenario of 7 to 7.5% of GDP this year and the erosion of reserves accelerate, while capital inflows have declined significantly due to the decline in foreign loans and FDI.” He even mentioned the possibility, more than likely according to even the least initiated, that “the crisis may blow the budgetary spending of subsidy and precipitate the reform of the system.
The damage to the budget and the BNA, through the French figures
In short, and in its numerical version, “the surge in grain and fuel prices will leave no choice but to drastically readjust either budgetary allocations or administered prices. And Cyril Morée specifies on this subject that:
– An oil barrel price permanently above 110 USD could generate an additional cost of more than 5 billion TND (1.5 billion EUR) of fuel subsidy expenses that the 2022 Finance Law had budgeted at 2.9 billion TND with the assumption of a barrel at 75 USD and an exchange rate at 2.9 TND/USD.
Any increase in the price of a barrel of oil by 1 USD would generate an additional subsidy cost of about 140 MD, and any increase by 10% in the exchange rate of the dollar an additional cost of 40 MD. In 2021, the unanticipated increase in the price of oil had already caused a readjustment of nearly TND 3 billion. As partial compensation, the fee collected for the passage of Algerian gas to Italy has brought 550 MD in 2021 (+218 MD) and should increase again this year in proportions at least equivalent.
– On the rise in the finance law, the TND 3.7 billion budgeted for the compensation of basic foodstuffs will be insufficient amid soaring grain prices. This allocation was to be used to finance the subsidy in 2022 as well as to clear the payment arrears (TND 2 billion) that would accumulate with the Grain Office (OTC). The risks weighing on the banking system are also to be monitored. The arrears of the subsidy fund with the OTC are reflected in the claims of the “Banque Nationale Agricole” (BNA) with the Office. These claims would reach TND 4.3 billion (EUR 1.3 billion) and the prudential limits of 25% of the total outstanding credit of the bank. This situation poses a potential systemic risk to the banking sector given the size of the BNA.
