Tunisian Economic Crisis Mutes Build-up to Ramadan

 A Tunisian vendor sells olives at a market in Tunis, Tunisia, 08 March 2024. (EPA)
A Tunisian vendor sells olives at a market in Tunis, Tunisia, 08 March 2024. (EPA)
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Tunisian Economic Crisis Mutes Build-up to Ramadan

 A Tunisian vendor sells olives at a market in Tunis, Tunisia, 08 March 2024. (EPA)
A Tunisian vendor sells olives at a market in Tunis, Tunisia, 08 March 2024. (EPA)

Tunisians are bracing themselves for more subdued celebrations during the Muslim holy month of Ramadan as an economic crisis grips the North African country.

In past years "you wouldn't have been able to set foot in the market because it was so crowded", vegetable merchant Mohamed Doryi told AFP.

"That's not the case today," said the 69-year-old, who no longer displays his prices to avoid scaring away potential customers.

Tunisians usually prepare for Ramadan -- when daytime fasting is followed by festive but often costly meals with family and friends -- by stocking up on large amounts of food.

But this year things are different, with purchasing power greatly diminished because of soaring prices, a recession and rising unemployment.

"I'm not poor, but I can't do it anymore. My pension doesn't cover my needs," said Fayka, a 65-year-old at Tunis's working-class Bab El Fellah market.

"This is the first time I've bought fruits and vegetables by the piece" instead of in bulk, the retiree added, asking that only her first name be used.

Tunisia has also been beset by political tensions since President Kais Saied granted himself full powers in July 2021.

A third of its 12 million people currently live below the poverty line after two years of high inflation -- running at 10 percent on average per year -- and the price of many foods has tripled.

GDP growth came in at 0.4 percent last year after severe drought damaged agriculture, and the country entered a recession at the end of 2023.

Unemployment also rose to 16.4 percent at the end of last year, compared with 15.2 percent at the end of 2022.

'Stagflation'

Economist Ridha Chkoundali says Tunisia is "experiencing a period of stagflation, which means a decline in growth and a rise in inflation".

This has been caused by "the deliberate choice of public authorities to prefer to repay debt, especially external debt", he argued.

This came at "the detriment of supplying the market with basic foodstuffs and agricultural inputs" such as fertilizers and fodder.

A shortage of money in the public coffers -- burdened by the salaries of more than 650,000 civil servants -- has meant regular shortages of basic subsidized items including flour, rice, sugar and semolina as the state has difficulties paying for them.

Tunisian banks are being asked by the state to finance the country's debt amounting to 80 percent of GDP, undermining their ability to lend to the private sector and reducing growth even more.

Chkoundali argues that a lack of resources is a result of "the choice to break with the IMF".

In October 2022, the International Monetary Fund agreed in principle to lend Tunisia around $2 billion, but Saied later rejected it on the grounds that the reforms it required in return were not sustainable.

In a Tunis butcher's shop, a 50-year-old woman cautiously ordered 150 grams of veal ahead of Ramadan.

Red meat, which now costs more than 40 dinars (around $13) a kilo, is a luxury in a country where the average salary is 1,000 dinars per month (about $325).

"My husband recently passed away and I can't afford to buy more," she whispered to the butcher.

Mustapha Ben Salmane, 52, told AFP that more and more customers ask for just a handful of minced meat or spicy merguez sausage.

"I can't say no to them. People are exhausted," he said.



Firm Dollar Keeps Pound, Euro and Yen Under Pressure

US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo
US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo
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Firm Dollar Keeps Pound, Euro and Yen Under Pressure

US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo
US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo

The US dollar charged ahead on Thursday, underpinned by rising Treasury yields, putting the yen, sterling and euro under pressure near multi-month lows amid the shifting threat of tariffs.

The focus for markets in 2025 has been on US President-elect Donald Trump's agenda as he steps back into the White House on Jan. 20, with analysts expecting his policies to both bolster growth and add to price pressures, according to Reuters.

CNN on Wednesday reported that Trump is considering declaring a national economic emergency to provide legal justification for a series of universal tariffs on allies and adversaries. On Monday, the Washington Post said Trump was looking at more nuanced tariffs, which he later denied.

Concerns that policies introduced by the Trump administration could reignite inflation has led bond yields higher, with the yield on the benchmark 10-year US Treasury note hitting 4.73% on Wednesday, its highest since April 25. It was at 4.6709% on Thursday.

"Trump's shifting narrative on tariffs has undoubtedly had an effect on USD. It seems this capriciousness is something markets will have to adapt to over the coming four years," said Kieran Williams, head of Asia FX at InTouch Capital Markets.

The bond market selloff has left the dollar standing tall and casting a shadow on the currency market.

Among the most affected was the pound, which was headed for its biggest three-day drop in nearly two years.

Sterling slid to $1.2239 on Thursday, its weakest since November 2023, even as British government bond yields hit multi-year highs.

Ordinarily, higher gilt yields would support the pound, but not in this case.

The sell-off in UK government bond markets resumed on Thursday, with 10-year and 30-year gilt yields jumping again in early trading, as confidence in Britain's fiscal outlook deteriorates.

"Such a simultaneous sell-off in currency and bonds is rather unusual for a G10 country," said Michael Pfister, FX analyst at Commerzbank.

"It seems to be the culmination of a development that began several months ago. The new Labour government's approval ratings are at record lows just a few months after the election, and business and consumer sentiment is severely depressed."

Sterling was last down about 0.69% at $1.2282.

The euro also eased, albeit less than the pound, to $1.0302, lurking close to the two-year low it hit last week as investors remain worried the single currency may fall to the key $1 mark this year due to tariff uncertainties.

The yen hovered near the key 160 per dollar mark that led to Tokyo intervening in the market last July, after it touched a near six-month low of 158.55 on Wednesday.

Though it strengthened a bit on the day and was last at 158.15 per dollar. That all left the dollar index, which measures the US currency against six other units, up 0.15% and at 109.18, just shy of the two-year high it touched last week.

Also in the mix were the Federal Reserve minutes of its December meeting, released on Wednesday, which showed the central bank flagged new inflation concerns and officials saw a rising risk the incoming administration's plans may slow economic growth and raise unemployment.

With US markets closed on Thursday, the spotlight will be on Friday's payrolls report as investors parse through data to gauge when the Fed will next cut rates.