Ukraine war: IACE calls for other alternatives in terms of grain supply and tourism markets

The Arab Institute of Business Managers (IACE), on Wednesday, called on the government to urgently set up a crisis unit to identify alternatives in terms of grain supply sources, following the war in Ukraine, a country until then a privileged supplier of Tunisia.
In a note entitled “The war in Ukraine: impacts and measures to be taken”, the IACE also emphasised the need to find the required financing mechanisms insofar as “the solvency of customers will become an important criterion in the prioritisation of supplies by suppliers”, and
Tunisia currently has a high solvency risk. Tunisia, which is highly dependent on grain as it imports 84% of its needs in soft wheat, about 40% for durum wheat and 50% for barley, currently suffers from a chronic shortage of storage capacity, limited to 3 months.
The current price level of wheat and other grains could lead to an additional burden in terms of subsidy of about 1.3 billion dinars, compared to the initial burden, provided for in the state budget of 2.2 billion dinars for subsidies of basic commodities.
Without subsidy, the IACE estimates that the current grain price on the global market would cause a rise the price of pasta by 160 millimes per kilogram, i.e. 20% up compared to current prices, which could reach 200 millimes per kilogram if prices continue to grow at the same rate.
Consequently, the Institute considered it essential to communicate on the reality of the situation and its impact in order to make the population aware of the difficulties to be faced and to change food habits (in particular by avoiding waste). It also insisted on the need to prioritise the general interest over particular interests and direct agricultural water resources exclusively towards grain crops in order to improve as much as possible the prospects of the coming harvest.

Concerns about soaring oil prices
Besides the increase in wheat prices, the IACE also expressed its concerns about the surge in oil prices, especially since the 2022 budget of Tunisia was drawn up on the basis of a barrel price of 75 dollars.
It considered such a burden unsustainable for the state budget, which will result in an inevitable increase in pump prices. That increase could reach about 1.2 dinars per litre, all products combined, and up to 2 dinars and more per litre if the most pessimistic forecasts are reached.
Two thirds would concern road fuels and one third industrial consumption, which will have an impact on the price of electricity and consequently the competitiveness of Tunisian companies. However, this direct impact will be partly offset by a reduction in consumption due to the slowdown in economic activity.
In this context, the IACE has urged the government to mobilise financial resources, even if small, to the supply of essential products to the detriment of “secondary” products and to secure the immediate release of the European Union’s budgetary support of 300 million euros.
It also stressed the need to speed up negotiations with the IMF and the World Bank to secure exceptional emergency aid of 1 to 1.5 billion dollars for the year 2022.
The IACE also called to consider rescheduling Tunisia’s debt (outside the financial markets), in order to transfer resources dedicated to debt servicing to financing the supply of basic products, especially as bilateral and multilateral financial institutions will be obliged to soften their positions towards vulnerable countries such as Tunisia.

Need to target Western European tourists
The IACE also pointed to the need to consider the possibility of emergency aid to needy families through disbursing an amount of 300 million dollars (about 880 million dinars) as was done in 2021 with the support of the World Bank.
As to the impact on tourism and on tourist arrivals in Tunisia for the year 2022, the institute has estimated that the prices of air transport could see an increase that will have an impact on the prices offered by tour operators and will discourage many European tourists from visiting Tunisia.
According to the same source, it is very likely that there will be no Russian tourists this season because of the strong devaluation of the Russian rouble which affects the purchasing power of the population, not to mention the impact of Russia’s disconnection from the SWIFT system which will complicate transactions with Russian partners.
Therefore, the Institute urged taking actions to maintain the objectives of the 2022 tourist season by targeting tourists from Western Europe