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Tunisia to Receive 450 Million Euros in European Loans, Grants

Members of the honor guard stand at attention during a flag-raising in place of Kasba in Tunis, Tunisia, June 26, 2018. REUTERS/Zoubeir Souissi
Members of the honor guard stand at attention during a flag-raising in place of Kasba in Tunis, Tunisia, June 26, 2018. REUTERS/Zoubeir Souissi
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Tunisia to Receive 450 Million Euros in European Loans, Grants

Members of the honor guard stand at attention during a flag-raising in place of Kasba in Tunis, Tunisia, June 26, 2018. REUTERS/Zoubeir Souissi
Members of the honor guard stand at attention during a flag-raising in place of Kasba in Tunis, Tunisia, June 26, 2018. REUTERS/Zoubeir Souissi

The European Investment Bank on Tuesday announced grants and loans worth 450 million euros ($480 million) for crisis-hit Tunisia to support small and medium-sized enterprises and infrastructure projects.

The EIB, the European Union's investment arm, said it was providing "new financial support" to Tunisia, targeting "high-impact projects for the population and the country's economic and social development".

The financing will be formalized during the Tunisia Investment Forum to be held on Wednesday and Thursday in Tunis, the bank said in a statement.

The forum will be attended by the EIB's new vice-president in charge of financing in the Maghreb region, Ioannis Tsakiris, Reuters reported.

The funding "will play a crucial role in the creation of jobs, stimulating innovation and promoting balanced development to benefit all Tunisians", Tsakiris said in the statement.

The financing includes a line of credit worth 170 million euros for micro, small and medium-sized enterprises, "which make up 90 percent of the country's businesses and employ 60 percent of the workforce", according to the bank.

It will also provide 210 million euros to develop the "strategic" route between Tunisia's second city of Sfax on its eastern coast and the remote, underserved Kasserine area in the west.

A loan of 45 million euros will be granted to finance the ELMED electricity linkage project between Tunisia and Italy.

Tunisia has faced mounting financial woes, with debt levels at 80 percent of its GDP and unemployment and poverty on the rise.

The crisis has been compounded by the power grab staged by President Kais Saied since July 2021.

Negotiations with the International Monetary Fund for a $2 billion loan have stalled since then, with Saied rejecting reforms demanded by the body.

The crisis has driven thousands of Tunisians to attempt perilous Mediterranean boat crossings in the hope of finding better lives in Europe.

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IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
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IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki

The International Monetary Fund said on Thursday that an escalation of the conflict in the Middle East could have significant economic ramifications for the region and the global economy, but commodity prices remain below the highs of the past year.

IMF spokesperson Julie Kozack told a regular news briefing that the Fund is closely monitoring the situation in southern Lebanon with "grave concern" and offered condolences for the loss of life.

"The potential for further escalation of the conflict heightens risks and uncertainty and could have significant economic ramifications for the region and beyond," Kozack said.

According to Reuters, she said it was too early to predict specific impacts on the global economy, but noted that economies in the region have already suffered greatly, especially in Gaza, where the civilian population "faces dire socioeconomic conditions, a humanitarian crisis and insufficient aid deliveries.

The IMF estimates that Gaza's GDP declined 86% in the first half of 2024, Kozack said, while the West Bank's first-half GDP likely declined 25%, with prospects of a further deterioration.

Israel's GDP contracted by about 20% in the fourth quarter of 2023 after the conflict began, and the country has seen only a partial recovery in the first half of 2024, she added.
The IMF will update its economic projections for all countries and the global economy later in October when the global lender and World Bank hold their fall meetings in Washington.
"In Lebanon, the recent intensification of the conflict is exacerbating the country's already fragile macroeconomic and social situation," Kozack said, referring to Israel's airstrikes on Hezbollah in Lebanon.
"The conflict has inflicted a heavy human toll on the country, and it has damaged physical infrastructure."
The main channels for the conflict to impact the global economy have been through higher commodity prices, including oil and grains, as well as increased shipping costs, as vessels avoid potential missile attacks by Yemen's Houthis on vessels in the Red Sea, Kozack said. But commodity prices are currently lower than their peaks in the past year.
"I just emphasize once again that we're closely monitoring the situation, and this is a situation of great concern and very high uncertainty," she added.
Lebanon in 2022 reached a staff-level agreement with the IMF on a potential loan program, but there has been insufficient progress on required reforms, Kozack said.
"We are prepared to engage with Lebanon on a possible financing program when the situation is appropriate to do so, but it would necessitate that the actions can be taken and decisive policy measures can be taken," Kozack added. "We are currently supporting Lebanon through capacity development assistance and other areas where possible."