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".



Iraq Oil Output Exceeds 5 million bpd

Majnoon oil field near the Iraqi city of Basra (Reuters)
Majnoon oil field near the Iraqi city of Basra (Reuters)
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Iraq Oil Output Exceeds 5 million bpd

Majnoon oil field near the Iraqi city of Basra (Reuters)
Majnoon oil field near the Iraqi city of Basra (Reuters)

Iraq produces more than 5 million barrels of oil per day (bpd), Oil Minister Basim Mohammed told state news agency INA on Saturday.

According to Reuters, Iraq is pushing for a higher OPEC production quota as the economic fallout from the Iran war and new investment by oil majors increase pressure on Baghdad to boost output, potentially putting it at odds with the producer group.

The conflict has hit Iraq particularly hard, forcing major export cuts and depriving the state of oil revenue, which accounted for 88% of government income last year.


IMF: Any Slowdown in AI-driven Growth Would be Factor for Central Banks

IMF Managing Director Kristalina Georgieva speaks during the Annual Meetings Plenary at the Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) at the Queen Sirikit National Convention Center (QSNCC) in Bangkok on October 16, 2026. (Photo by Lillian SUWANRUMPHA / AFP)
IMF Managing Director Kristalina Georgieva speaks during the Annual Meetings Plenary at the Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) at the Queen Sirikit National Convention Center (QSNCC) in Bangkok on October 16, 2026. (Photo by Lillian SUWANRUMPHA / AFP)
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IMF: Any Slowdown in AI-driven Growth Would be Factor for Central Banks

IMF Managing Director Kristalina Georgieva speaks during the Annual Meetings Plenary at the Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) at the Queen Sirikit National Convention Center (QSNCC) in Bangkok on October 16, 2026. (Photo by Lillian SUWANRUMPHA / AFP)
IMF Managing Director Kristalina Georgieva speaks during the Annual Meetings Plenary at the Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) at the Queen Sirikit National Convention Center (QSNCC) in Bangkok on October 16, 2026. (Photo by Lillian SUWANRUMPHA / AFP)

Central bankers around the world would need to consider any slowdown in AI-driven growth as they assess steps in their fight against inflation, International Monetary Fund Managing Director Kristalina Georgieva said on Friday.

Georgieva said concerns about dependence on the AI investment boom and high valuations were impacting markets around the world.

"Things are going up and down, and this is likely to continue," she told an audience at IMF headquarters in Washington, adding that the volatility would complicate the job of central banks at a time when risks to price stability had been growing.

A steep rout in technology stocks on Thursday rippled through markets on fears that ⁠the Democrats' victory ⁠in the US midterm elections would increase regulatory scrutiny of AI and slow the data center build-out, sending investors to the safety of bonds.

The political jitters are hitting an AI trade already on shaky footing due to worry about return on massive spending on AI-related infrastructure, with the meltdown spurring margin calls and spooking retail investors and hedge ⁠funds alike.

Georgieva said the AI investment boom was lifting growth in some countries, helping to offset a negative oil-supply shock triggered by the war in the Middle East, but it was also adding to inflationary pressures and financial stability concerns.

The IMF last month flagged significant growth and financial stability risks from a potential ending of the AI investment boom, among other factors, including a prolonged Middle East war. At the time, it warned that a steep drop in AI investment could lead to a sharp fall in asset prices, ultimately cutting global GDP ⁠by 1.1% ⁠by 2028, including a 1.8% drop in US output.

Georgieva did not repeat the downside forecast on Friday, but acknowledged the recent market volatility.

"Should there be a slowdown in the AI-driven growth impulse, it would need to be factored in as central banks assess the necessary steps in the fight against stubborn inflation," she said.

Democrats are planning to unleash a flood of new legislation targeting artificial intelligence systems and data-center development when they take control of the US Congress in January, Reuters reported on Friday, citing congressional aides and advocates.

That would mark a sharp shift from the Republican-led Congress, where lawmakers largely focused on promoting AI development and declined to pass legislation restricting the technology.


World Food Prices Dip in October, but Remain Higher Than a Year Ago

A worker carries loaves of bread for sale at a bakery in the capital city of Cairo, Egypt November 4, 2026. (Reuters)
A worker carries loaves of bread for sale at a bakery in the capital city of Cairo, Egypt November 4, 2026. (Reuters)
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World Food Prices Dip in October, but Remain Higher Than a Year Ago

A worker carries loaves of bread for sale at a bakery in the capital city of Cairo, Egypt November 4, 2026. (Reuters)
A worker carries loaves of bread for sale at a bakery in the capital city of Cairo, Egypt November 4, 2026. (Reuters)

World food prices edged lower in October as weaker import demand contributed to monthly declines in cereal, dairy and meat prices, but were still nearly 6% higher than a year earlier, the United Nations' Food and Agriculture Organization said on Friday.

The FAO Food Price Index, which tracks monthly changes in international prices for a basket of food commodities, ‌averaged 133.9 points ‌in October, down from a revised ‌135.6 ⁠in September.

The index ⁠was 5.9% higher than a year earlier, but remained 16.4% below its March 2022 peak.

FAO's cereal price index fell 4.5% from September and was 12.6% lower than a year ago, as wheat and maize quotations declined. Wheat prices eased on weak import demand ⁠and improved production prospects, especially in Argentina.

"Expectations of ‌easing constraints on Black ‌Sea export flows added to the downward pressure on prices, ‌although continued disruptions to Black Sea logistics limited the decline," ‌FAO said in a statement.

Maize prices also eased after reaching a three-year high in September, pressured by the US harvest, expectations of ample supplies in South America and renewed ‌prospects of easing tensions in the Black Sea region.

Vegetable oil prices edged up 0.3%, ⁠as ⁠higher soybean and sunflower oil prices more than offset a fall in rapeseed oil prices.

Sugar prices rose 6.6%, their fourth straight monthly increase, to the highest level since December 2024, after rainfall disrupted harvesting in Brazil. They were now 28.8% above a year ago.

The dairy index fell 1.1%, as lower butter and cheese prices linked to ample supplies and subdued demand outweighed gains in milk powder.

The meat index declined 1.2%, while still slightly above its year-earlier level, as ovine and bovine meat prices fell.