While the attention of all Tunisia is waning against the backdrop of the artificial crisis of the Cabinet reshuffle and under the snobbery of the “best government Tunisia has ever had,” two events, of paramount importance and dangerous economic significance are coming.
But let us, first, give some information that are equally important and whose meaning will better illuminate the meaning of our words.
– Broadly, the Tunisian State budget for fiscal year 2013 is estimated at 26.792 billion TD. More than 77% of this budget goes to the functioning of the state, mostly for salaries, not to mention the burdens of debt and subsidies (4.2 billion dinars). In total, government spending is estimated at 23.932 billion TD. In front there are only 19.975 billion TD of revenue. Hence, there is a deficit of 3.957 billion TD. To this are added 11.6 billion TD of trade deficit. This amount alone represents, according to economist Ezzeddine Saidane, 15% of the GDP, that is to say, of all the wealth created by Tunisia per year.
– Officially, budget resources increased by 4.9%. This increase, according to economists, however, is only facial, since the depreciation of the Tunisian Dinar was in average at 6%.
– As noted by economist Mourad Hattab, “Tunisia’s debts account for 200% of state revenue.” Official sources said, in what could be interpreted as a tendentious reading, the debt ratio of Tunisia will represent 46.8% of GDP (47.2% according to the IMF). To November 31, according to figures of the Ministry of Finance, the budget implementation rate was 65% in loans disbursed and already 92% at the level of financial charges. Thus, the state is itself paying to clean up the mess.
– This debt is so heavy that it does not stop deteriorating Tunisia’s sovereign rating and therefore shut, little by little, the doors of financial markets to the country. Tunisia has certainly borrowed twice from these markets. But this was possible only with the guarantee of two states, first the U.S. and then Japan. Hence, the Tunisian government has decided to change tack, to opt for the Islamic financial market “Sukuk.”
– New recourse to IMF binding loans since 1986
According to the latest official figures, Tunisia has already mobilized 1,101.4 MTD in donation and 3,899.3 MTD in miscellaneous loans. These five billion TD, do not seem sufficient, because Tunisia is in loan talks with the IMF. We do not yet know the amount of the new loan, but remember that Tunisia had announced last year it was seeking a loan of $ 2.5 billion from the IMF. Obviously, too, this loan should be called a “Stand-By Arrangement.” This credit, as indicated last Friday in Washington by IMF official for the Middle East, “is a loan that would help the country meet its current challenges and to provide a cushion of protection in case of international economic downturn.” It will start to generate interest, usually at the rate of the international market, only at the time of disbursement when the situation deteriorates. Otherwise, only a tiny commission will be paid by Tunisia.
The last loan Tunisia had contracted with the IMF dates back to 1986, when the country was insolvent and its finances were at their worst. Tunisia had repaid this loan in 1991 in anticipation. Ever since, Tunisia had never appealed to this authority whose loans are very restrictive and verge even on the loss of independence of financial decision in favor of the IMF. It’s like when a company is placed in official receivership.
– A new Structural Adjustment Plan (SAP) for Tunisia?
Many Tunisians remember, with pain, the Structural Adjustment Program (SAP) imposed by the IMF when it had granted a precautionary loan to Tunisia at the end of the reign of Bourguiba. Actually, the IMF is not a normal money lender. Its loans are generally subject to rigorous if not drastic economic and financial conditions. These loans are usually subject to classic conditions according to the IMF.
They involve the consolidation of public finances in particular by adjusting prices to decrease the burden of compensation and in extreme conditions, completely abandoning compensation, reducing debt, removing import quotas and lowering the weight of the public service. Wherever it has intervened, the IMF left social desolation. In some countries like Egypt under Mubarak, this had led to riots. What do these conditions mean?
In practice, they mean higher prices for commodities, in particular. They also mean a compensation fund which operates less and a public service that should no longer recruit, if not layoff employees. They are also banks that give less credit for consumption. Older Tunisians will certainly remember that Bourguiba had tried to do this and would recall the bread riots in January 1984. Three years later, Bourguiba was removed from power.
Tunisia is not there yet. It remains nevertheless true that the recourse to the IMF and the presence in Tunisia of President of the World Bank Jim Yong Kim, are not good signs of an economic recovery in Tunisia.
The World Bank has provided Tunisia a loan of one billion dollars since the Revolution. J.Y. Kim already stated that “painful reforms should be carried out in a country plagued by poverty and social conflict two years after the revolution.” Clearly then, Tunisia is taking its first steps towards a new PAS and is preparing for one or more austerity budgets and a long lean period. Still, we would conclude saying “God forbid!”
