Tunisian
officials breathed a sigh of relief on October 15 after the International
Monetary Fund announced preliminary approval for a $1.9 billion loan package. The country’s politicians viewed it
as a vote of confidence for their policies, while government technocrats felt
vindicated in the way they negotiated the deal.
اضافة اعلان
The protracted
talks over the agreement took more than 15 months and occurred amid Tunisia’s
worsening financial crisis and growing doubts about the prospect for agreement.
By itself, the
relatively small loan will not alleviate Tunisia’s budget deficit, which is expected to reach 9.7 percent of GDP
this year, and its nearly $40 billion debt burden. But the authorities hope the
deal will unblock bilateral loan agreements and be the stepping stone for economic recovery.
Success in this
regard will hinge on the credibility of Tunisia’s diplomatic pitches as the
country tries to convince Western partners and oil-rich regional donors to come
to its aid.
If approved by
the IMF Executive Board in December, the loan is expected to be disbursed in
eight installments of less than $250 million each, starting in January.
Intermittent release of funds will enable periodic IMF reviews, a routine
process in similar loan agreements.
But in
Tunisia’s case, the extra caution seems to stem from the country’s inability in
recent years to deliver on pledges of reform embedded in other loan deals.
Since 2011, successive governments viewed big spending and public-service
hiring as necessary to placate discontent – despite their devastating economic
costs.
To deliver a
comprehensive reform program this time, and to unleash “Tunisia’s potential for
inclusive and much-needed job-rich economic growth”, as envisioned by IMF Middle East and Central Asia
Director Jihad Azour, political and social stability will be crucial.
Almost nobody
in Tunisia would dispute the IMF’s objectives to see the government unfetter
private initiative, encourage investment, and introduce greater tax equity.
What is controversial, however, is the desire to cut public spending –
including civil service wages and what the IMF calls “generalized wasteful
price subsidies”.
There is
wariness that the contemplated measures could mean more unemployment and higher
inflation at a time when most Tunisians complain of increasing hardship. There
is also concern that the bureaucracy could be overwhelmed by the daunting tasks
of overhauling the subsidy system and downsizing public services.
Part of the plan
is therefore to try to limit the impact of reforms on vulnerable segments of
society through an expanded social safety net and measures such as direct cash
transfers. Still, Tunisian economist Radhi Meddeb believes the reform program
could be “too difficult to implement from the social and political perspectives”.
Tunisia today finds itself at a crossroads: either face the consequences of fractious politics, or engage in a long-delayed reform process to help the country finally reach its potential.
Some of the
predicted difficulties are tied to likely opposition from the main trade union,
UGTT. After summer negotiations with the government, the UGTT's leadership
faced criticism from its rank and file for accepting modest wage increases below inflation
forecasts. The union will not yield as easily to a new set of government
demands.
The IMF’s
insistence that Tunisia “strengthen governance and transparency in the public
sector” is understandable, considering the budget deficit faced by many public
enterprises – including those enjoying virtual monopoly in their sectors, such
as the tobacco manufacturing enterprise or the national water and electricity companies.
In a recent
interview, IMF Managing Director Kristalina Georgieva revealed that
the privatization of “some state-owned companies” was among the issues
discussed by the fund with Tunisian officials.
Without the
union’s acquiescence, however, the opening of companies to private sector
participation, much less full privatization, could spark social
turbulence.
Beyond the
possible resistance of the unions, the most daunting obstacle could be the
country’s politics. Indeed, the absence of an inclusive process involving
political parties and civil society will make a national consensus around
IMF-backed reforms difficult to forge.
Today,
political factors remain the deal’s elephant in the room. Despite criticism,
President Kais Saied is on a solitary path to reengineer the system according
to his own vision.
Although IMF
Executive Board approval is virtually guaranteed, many view the two-month delay
as a way to assess political progress in the country in conjunction
with the December 17 legislative vote. Ballot results and turnout rates could
offer an indication of where the political process is heading. Many parties
already intend to boycott the election.
Across the
political spectrum, populist discourse prevails. Most parties opposed to Saied,
including Ennahda's Islamists and their Free Destourian nemeses, are basing
their narratives on alarm over the deterioration of living conditions. They are
also pressing the government to disclose the true extent of the economic crisis and to be more
transparent about the nature of the envisaged austerity measures.
Unless he seeks
a pragmatic middle-ground, Saied risks a political opposition that coalesces
with the trade unions to shape a common front against the IMF-sanctioned
reforms.
The entire
political class could also find itself swept away by spontaneous expressions of
discontent as heralded by recent protests in poor districts of the capital.
Furthermore,
the Tunisian president, who opposes decisions that could penalize the poor, may
not offer a stalwart defense of the reforms, especially if social upheaval sets
in.
To preempt
these scenarios, the government and the president must take ownership of the
reform plan, offer convincing arguments for the population to accept the
sacrifices it entails, and lobby the political class to stand behind the
process.
Tunisia today
finds itself at a crossroads: either face the consequences of fractious
politics, or engage in a long-delayed reform process to help the country
finally reach its potential.
Oussama Romdhani is
the editor of The Arab Weekly. He previously served in the Tunisian government
and as a diplomat in Washington, DC. Syndication Bureau.
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