Tunisia Meets the IMF: What's at Stake?

Girls walk past a closed souvenir shop in El Jem, amid the coronavirus disease (COVID-19) outbreak, Tunisia, May 20, 2021. REUTERS/Angus McDowall
Girls walk past a closed souvenir shop in El Jem, amid the coronavirus disease (COVID-19) outbreak, Tunisia, May 20, 2021. REUTERS/Angus McDowall
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Tunisia Meets the IMF: What's at Stake?

Girls walk past a closed souvenir shop in El Jem, amid the coronavirus disease (COVID-19) outbreak, Tunisia, May 20, 2021. REUTERS/Angus McDowall
Girls walk past a closed souvenir shop in El Jem, amid the coronavirus disease (COVID-19) outbreak, Tunisia, May 20, 2021. REUTERS/Angus McDowall

Tunisia and the International Monetary Fund are in preliminary talks, with an eye on a potential multi-billion-dollar rescue deal for an economy plagued by recession, public debt, inflation and unemployment.

The North African nation on Monday started talks with the Washington-based crisis lender, which has called for "deep reforms" and public spending cuts.

But many Tunisians, already struggling to make ends meet, fear a deal that involves painful reforms could leave them much worse off.

Why is Tunisia seeking a new loan?

Tunisians have endured a decade of economic stagnation since the revolt in early 2011.

Two previous IMF loan deals, for $1.7 billion in 2013 and a further $2.8 billion in 2016, have done little to fix the country's public finances.

The coronavirus pandemic put the economy on life support, with a deep recession that sent 80,000 small and medium-sized firms into bankruptcy or out of the country since early 2020, according to official data.

Over the same period, unemployment has surged from 15.1 to 18.4 percent and inflation has eaten away at people's buying power.

Since the revolution, per capita GDP has dropped by a fifth and the dinar has fallen by 40 percent against other currencies.

But economist Ezzedine Saidane said Tunisia's biggest challenge is its burgeoning public debt.

"Public debt is at an unprecedented level, over 100 percent of gross domestic product," he told AFP.

A western diplomat in Tunis told AFP on condition of anonymity that Tunisia was borrowing to pay public sector salaries.

That has weighed on Tunisia's credibility as a borrower internationally, Saidane said.

Moody's ratings agency in October downgraded Tunisian debt to Caa1 from B3, warning the country could slide towards default.

"Tunisia will inevitably have to go through the IMF to rebuild some of its credibility in order to mobilize resources from overseas," Saidane added.

What is the IMF likely to demand?

The IMF has publicly voiced concern over Tunisia's budget deficits and in particular its public sector wage bill.

"It's an economy that needs very deep, structural reforms, especially to improve the business environment," the lender's outgoing Tunisia envoy Jerome Vacher told AFP last month.

The IMF, which has a record of demanding painful cuts to public spending, is likely to condition a loan on slashing the state's wage bill, which Vacher said is one of the highest in the world relative to the size of the economy.

More than half of public spending goes on paying the salaries of around 650,000 public servants in the country of 12 million.

On top of that, Tunisia's sprawling public companies employ at least 150,000 people at the taxpayer's expense -- money the IMF says could fund education, health and infrastructure.

The lender is also likely to demand an end to subsidies on energy, with some funds instead distributed directly to the poorest families as cash.

What are the main obstacles to a deal?

Cutting public spending will be tough for authorities to sell to the Tunisian public.

President Kais Saied, who last July sacked the government and seized wide-ranging powers, had widespread support -- and retains some -- for his efforts to "cleanse" the dysfunctional and corrupt system that followed the 2011 revolt.

But Romdhane Ben Amor of the Tunisian Forum for Economic and Social Rights warned that "no political actor can get away with removing subsidies".

He said many subsidized goods -- such as cooking oil -- were getting harder to find and that public services, particularly health and education, were already decrepit.

"You're telling me the solution is to cut even more?" he asked.

Tunisia's powerful UGTT trade union confederation, which has a long history of resistance to outside interference, is expected to push back hard against IMF efforts to impose austerity.

Monica Marks, a Tunisia expert at New York University in Abu Dhabi, said Saied would face a tough balancing act.

"On the one hand, he needs to placate the UGTT by staving off IMF-backed austerity policies like subsidy cuts and hiring or salary freezes," she said.

"On the other, if he refuses to play ball with the IMF, Tunisia might not secure a loan -- and could drop off an even steeper cliff than it's already fallen off of financially."

But, she warned: "Saied lacks any semblance of an economic plan".



PIF Launches New Company to Deliver Expo 2030 Riyadh

PIF Launches New Company to Deliver Expo 2030 Riyadh
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PIF Launches New Company to Deliver Expo 2030 Riyadh

PIF Launches New Company to Deliver Expo 2030 Riyadh

The Public Investment Fund (PIF) announced the launch of Expo 2030 Riyadh Company (ERC), wholly owned by PIF, to build and operate the facilities of Expo 2030 Riyadh –Saudi Arabia’s first World Expo– as well as preserving the legacy of the event.

In a press release, PIF said the masterplan for Expo 2030 Riyadh covers an area of six million square meters, making it one of the biggest World Expo sites. The Expo will be to the north of the city, near the future King Salman International Airport, and with direct connections to the Saudi capital’s landmarks.

According to SPA, Expo 2030 Riyadh is projected to attract more than 40 million visits. After the expo event, ERC plans to lead the transformation of the Expo’s gated area into a global village to serve as a multicultural hub for retail, food and beverage, surrounded by an international residential community with world-class amenities, and setting new standards in sustainable tourism, according to the release.

PIF continues with its strategic mandate to achieve economic impact for Saudi Arabia while securing sustainable returns. PIF is one of the world’s most impactful investors, driving Saudi Arabia’s economic diversification while also enabling the creation of key sectors and opportunities that help shape the global economy. PIF leads the development of transformative giga-projects and landmark real estate initiatives across Saudi Arabia.

PIF Head of the Local Real Estate Investment Division Saad Alkroud said: “ERC benefits from PIF’s diverse local and global ecosystem and the establishment of the company aligns with PIF’s local real estate strategy, which drives economic transformation and diversification, advancing urban innovation and enhancing quality of life, driven by the ambitious goals of Saudi Vision 2030.”

ERC is swiftly launching operations to fulfill its mandate, and will partner with the local and global private sector to achieve its goals for construction, cultural programming and event management, added the release.

Expo 2030 Riyadh runs from October 1, 2030 to March 31, 2031 and will further strengthen the city’s attractiveness to international businesses. It marks the city’s status as one of the world’s fastest-transforming capitals, one that combines sustainability, connectivity, and quality of life at scale. Riyadh was awarded the hosting rights for Expo 2030 in November 2023, winning the vote in the first round.

During its construction phases, Expo 2030 Riyadh and its legacy are projected to contribute around $64 billion to Saudi GDP and generate approximately 171,000 direct and indirect jobs. Once operational, it is expected to contribute approximately $5.6 billion to GDP.

Countries participating in Expo 2030 Riyadh will have the option of building permanent pavilions and being part of the event’s legacy. The Expo will provide opportunities for long-term business and investment growth.