The European Union said on Tuesday it will lend Tunisia 450 million euros ($500 million) to support its budget as the North African country faces a looming crisis in public finances for which it is seeking an international rescue package.
Speaking after a meeting with Tunisian government officials in Tunis, the EU commissioner for enlargement, Oliver Varhelyi, said the money would be sent by April and included 300 million euros allocated last year.
Credit rating agency Fitch this month downgraded Tunisian sovereign debt to junk status and the investment bank Morgan Stanley said it expected the government to default on loans.
Tunisia's public finances were already stretched before the pandemic and political turmoil since President Kais Saied suspended parliament and moved to one-man rule last year has delayed efforts to seek additional help.
The Ukraine war has aggravated the government's problems, causing price rises in fuel and grains, which are both subsidized in Tunisia.
The impact of those price rises on Tunisia's budget will be slightly less than 5 billion dinars ($1.7 billion) this year, the economy minister Samir Saied told Reuters.
Varhelyi also said the EU had allocated 200 million euros to Maghreb countries - which also include Algeria and Morocco - to help alleviate the impact of grain shortages resulting from the Ukraine crisis.
