Tunisian parliament meets to discuss loan from the African Export-Import Bank. Photo: Tunisian parliament
Tunisian parliament meets to discuss loan from the African Export-Import Bank. Photo: Tunisian parliament
Tunisian parliament meets to discuss loan from the African Export-Import Bank. Photo: Tunisian parliament
Tunisian parliament meets to discuss loan from the African Export-Import Bank. Photo: Tunisian parliament

MENA

Tunisia

Tunisia approves $500m loan from African Export-Import Bank to finance 2023 budget

Tunisia’s public budget remains in deficit as the government struggles to secure funding

Ghaya Ben Mbarek
Ghaya Ben Mbarek
Tunis

June 01, 2023

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  • Arabic

Tunisia will receive $500 million from the African Export-Import Bank to fund its 2023 budget, parliament announced on Thursday, after passing a law relating to the loan.

The Tunisian parliament’s House of Representatives approved the draft law relating to the approval of the loan’s clauses, which were concluded in an agreement between the Tunisian government and representatives of the African Export-Import Bank on April 4.

“The loan is a temporary solution for Tunisia’s current crisis,” MP Malik Kammoun told The National.

“We are aware that the ongoing economic crisis necessitates a strategic development and investment vision, however, it is impossible to be patient amid the current status quo,” Mr Kammoun added.

He said the Tunisian parliament’s finance committee is working on a more long-term solution for the country’s economic crisis, and that it was essential to find alternative funding.

“The parliament’s stance rejects external indebtedness but we are also aware of our living conditions and we are seeking solutions to mitigate that,” Mr Kammoun added.

A report by the parliament’s finance committee said the loan Tunisia will receive from the African Export-Import Bank will have an interest rate estimated at 10.28 per cent and a repayment period of five years, including a two-year grace period.

Tunisia is still reeling from an economic crisis that has caused the state's public finances to suffer an ongoing deficit, and it requires funding from international lenders to avoid collapse.

A bailout package from the International Monetary Fund remains pending, as discussions between the lender and the Tunisian government continues.

President Kais Saied has reiterated on multiple occasions his rejection of any conditional financial package that might disturb social peace and cause further suffering for Tunisian citizens.

Mr Saied told economics professors in a meeting on Wednesday that “it is out of question for the state to dispose of its public institutions” to receive any sort of conditional funding.

The IMF has repeatedly expressed the need for the Tunisian government to commit to a reform programme which would involve reducing subsidies and the management of core public sector institutions, including health and education.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Updated: June 01, 2023, 6:24 PM
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