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Tunisia: €250 million from France, available under IMF conditions

France is ready to help cover Tunisia’s remaining financing needs for 2023 and 2024. A package of €250 million is currently awaiting disbursement to help the country bridge its budgetary gap, said France’s ambassador to Tunisia, André Parant.

In an interview with TAP, the French diplomat said his country was also ready to mobilize international donors to cover the remaining financing needs.

However, he stressed that this support would depend on the “effective” implementation of the reform plan presented to the International Monetary Fund.

Tunisia’s economic and budgetary situation may become “extremely complicated” in the absence of an agreement with the IMF, according to him. Interview by TAP reporter Maroua Abdennebi:

TAP: How are French companies operating in Tunisia coping with this difficult economic situation?

AP: In 2022, investments by French companies established in Tunisia reached €187 million, making France the first provider of foreign direct investment in the country. There are currently more than a thousand French companies in Tunisia. They employ between 140,000 and 150,000 people. Despite certain difficulties linked to the business climate, most of these companies have grown over the past period. During the COVID-19 crisis, some companies were forced to reduce their workforce. However, they have managed to regain lost jobs and return to pre-pandemic production levels.

TAP: what are the main obstacles to the development of French companies in Tunisia, in your opinion?

AP: French companies are still facing certain problems, notably related to the current exchange rate regime and the supply of raw materials following the war in Ukraine, as well as the logistical difficulties of the port of Rades, which is now a bottleneck.

In addition, these companies are currently engaged in a CSR approach to reduce their carbon footprint. Many of them are in the process of setting up photovoltaic power generation.

However, Tunisia is not yet at the forefront of renewable energy (RE) technology. It currently produces only 3% of its electricity from renewables. The regulatory framework for renewable electricity production is not yet optimal to allow these companies to move quickly towards green electricity.

Faced with this situation, French companies have no choice but to use green electricity in order to comply with international requirements. The signing of a financing agreement with the International Monetary Fund (IMF) could give Tunisia greater certainty and visibility regarding its economic and financial development.

TAP: What do you recommend to speed up the signing of the IMF deal?

AP: Like the majority of our national and international partners, we believe that Tunisia’s economic and budgetary situation is likely to be extremely complicated in the absence of an agreement with the IMF. We are convinced that there is no plan B. This agreement is important because it will make it possible to raise the financial resources needed to accompany and finance the reform plan presented by the Tunisian authorities. It is always difficult to carry out reforms, but at a certain point it is no longer possible to accept a further deterioration of the situation.

These reforms must be carried out in the interest of the Tunisian economy and not in the interest of the IMF or international partners. It is important to stress that the Fund is not there to impose anything. It is there to support a program of reforms drawn up, supported and presented by the Tunisian government. It provides for restructuring of state enterprises, curbing the wage bill and reforming the subsidy system.

With regard to state enterprises, the Fund expects the Tunisian authorities to promulgate the law on the management of state enterprises. This text has been approved by the Cabinet meeting but has not yet been promulgated. The IMF also hopes that Tunisia will proceed with the gradual removal of fuel subsidies in order to achieve real prices. In the 2022 and 2023 finance laws, the government committed to reviewing fuel prices upwards by 3% per month. However, there have been no increases since November last year.

TAP: Recently, the EU High Representative for Foreign Affairs, Josep Borrell, said that he feared a collapse of Tunisia in the absence of an agreement with the IMF. Do you share this concern?

AP: I don’t know if we can speak of a risk of collapse. But there is a lot of concern about Tunisia’s economic and financial development. Nobody wants to see Tunisia’s situation deteriorate further and, as I said earlier, Tunisia’s current situation can only be reversed if the necessary reforms are implemented. The donor community is ready to help Tunisia. However, it wants to be sure that the reform program will be effectively implemented, and this requires political commitment at the highest possible level to support the implementation of these reforms.

It should be recalled that Tunisia has signed two financing arrangements with the IMF (2014 and 2017), which could not be completed because some commitments were not met.

TAP: As Tunisia’s leading economic partner, how does France intend to help Tunisia overcome this deadlock?

AP: We have been telling the Tunisian authorities for months that we are at their disposal to cover the residual financing needs for 2023 and 2024.

The Tunisian government’s budget for 2023 shows a financial gap around 1.5 to 1.8 billion dollars that needs to be filled.

The IMF expects to raise $1.9 billion over four years, which means that the first tranche to be disbursed would amount to around $500 million.

We currently have a €250 million package awaiting disbursement. It is divided as follows: €50 million will be disbursed as soon as the law on state enterprises is promulgated, and €200 million, the disbursement of which depends on signing an agreement with the IMF.

France is also prepared to provide additional support. We are ready to mobilize the international donor community to cover this residual need.

This presupposes that the Tunisian authorities first meet their commitments to the Fund, including the promulgation of the law on the governance of state enterprises and the gradual removal of fuel subsidies.

As I have already mentioned, a strong political will is needed to implement these reforms. If they are effectively implemented, the international community will be ready to help Tunisia.


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