Tunisia’s political experiment threatens economic collapse

Tunisia’s political experiment threatens economic collapse

NICE, France (AP) – Tunisia’s increasingly authoritarian president appears determined to overhaul the country’s political system. Not only does the strategy threaten a democracy that was once seen as a model for the Arab world, experts say it is also sending the economy into a tailspin.

The International Monetary Fund has frozen an arrangement designed to help the government obtain loans to pay public sector salaries and fill budget gaps exacerbated by the COVID-19 pandemic and the aftermath of the Russian war in Ukraine.

Foreign investors are withdrawing from Tunisia, rating agencies are on the alert. Inflation and unemployment are rising, and many Tunisians who once prided themselves on their country’s relative prosperity are now struggling to make ends meet.

An electoral debacle a week ago made matters worse: just 11% of voters turned out in a first-round election for a new parliament to replace a legislature dissolved by President Kais Saied last year. Opposition members, including those from the popular Islamist movement Ennahdha, are calling for his resignation, and trade unions are threatening a general strike.

Saied himself designed the elections to replace and reshape parliament as part of sweeping reforms that will strengthen his powers and which he says will resolve Tunisia’s multiple crises. But voters’ disillusionment with the ruling class amid dire economic troubles contributed to a near-boycott of the elections.

Tunisia’s western allies, such as the United States and France, have expressed concern and urged the president to engage in an inclusive political dialogue that would benefit the sluggish economy. Tunisia was the birthplace of the democratic uprisings of the Arab Spring 12 years ago.

Saied dismissed criticism of the low turnout, saying what really matters is the second round on January 19. He says his reforms are necessary to rid the country of Tunisia’s corrupt political class and foreign enemies. He lashed out at his political opponents in the Ennahdha party, which had the most MPs in the previous parliament, and this week ordered the arrest of their Vice President and former Prime Minister Ali Larayedeh on terrorism-related charges.

“Saied seems impervious to criticism and intent on paving his way towards a new political system no matter how few Tunisians participate in the process,” said Monica Marks, Tunisia expert and professor of Middle East politics at New York University in Abu Dhabi.

“No Tunisian has asked Saied to reinvent the wheel of Tunisian politics, write a new constitution and revise the electoral law,” Marks said. “What Tunisians have been asking for is a more respectful government that meets their bread-and-butter needs and gives them economic dignity.”

Saied’s promises to stabilize the economy contributed to his landslide victory in the 2019 presidential election.

But he has yet to come up with a stimulus plan or strategy for his heavily indebted government to secure money for food and energy subsidies. The president has marginalized economists in state institutions, blocked the country’s budget and spoiled the environment for foreign investors.

Tunisians have been hit by soaring food prices and shortages of fuel and staples like sugar, vegetable oil and rice in recent months. Inflation has hit 9.1%, the highest in three decades, according to the National Institute of Statistics, and unemployment is at 18%, according to the World Bank.

“President Saied seems naïve to think that if he can only complete his political roadmap, the economy will repair itself,” Geoff Porter, a New York City-based risk assessment analyst for North Africa, said in a recent briefing.

Tunisia reached a tentative deal with the IMF on a $1.9 billion loan in October. It would allow the heavily indebted Tunisian government to receive loans from other donors over a four-year period in exchange for sweeping economic reforms, including downsizing the public sector – one of the largest in the world – and a phasing out of subsidies.

The agreement was subject to approval by the IMF’s Executive Board, scheduled for December 19. State news agency TAP reported that “the government and IMF have agreed to postpone the final decision on the loan” to give Tunisian officials “more time to present a new reform plan for the country’s struggling economy.”

Tunisia urgently needs access to special drawing rights to prevent defaults on foreign debt and stabilize the economy, Porter said. He added: “Without the IMF funds, Tunisia’s economic free fall will accelerate.”

Foreign investors operating in Tunisia are concerned.

The pharmaceutical manufacturers Novartis, Bayer and GlaxoSmithKline are leaving the country because they are not being paid by the underfunded state pharmaceuticals dealer.

Royal Dutch Shell, which operates two gas fields that account for 40% of Tunisia’s domestic production, announced in November that it would leave Tunisia by the end of the year. Despite the hype surrounding the country’s hydrogen sector, nothing has been done to attract investors as the country’s regulators have been paralyzed by Saied’s policy moves, Porter said.

The president has also lost the tentative support of the country’s powerful trade union, the UGTT, for the IMF-mandated reform plan in exchange for a bailout.

UGTT leader Noureddine Taboubi agreed in August with the government to discuss a new “social contract” to help Tunisians in financial distress, state news agency TAP reported. But Taboubi, whose influential union represents 67% of Tunisia’s workforce, mostly employed in the public sector, recently backed out. He renewed his opposition to the IMF’s key demands for a loan program: a public sector wage freeze and the restructuring of state-owned enterprises.


Bouazza ben Bouazza contributed from Tunis, Tunisia.

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