IMF and EU are 'extorting Tunisia at the expense of its social peace', says analyst

Several European leaders have visited Tunisia over the past few weeks offering financial aid package in exchange for preventing migrant boats from crossing the Mediterranean

Workers at a bakery in the Tunisian capital, Tunis. The war between Russia and Ukraine, both wheat suppliers for Maghreb countries, has sent prices of flour and semolina soaring. All Photos: AFP

A staff member arranges baked goods at the bakery, which is not subsidised by the Tunisian state.

Flour prices have also risen as people stock up for the Muslim fasting month of Ramadan in April.

Tunisia imports almost half of the soft wheat used to make bread from Ukraine.

Authorities say the North African country has enough supplies to last three months.

Food prices were on the rise in North Africa even before Russia invaded Ukraine more than two weeks ago.

To keep prices affordable and avoid a repeat of bread riots that erupted in the 1980s, Tunisia subsidises staples like sugar, semolina and pasta.

For the past decade, Tunisia has set the price of a baguette loaf of bread at six US cents.

Some in the region fear the Russian invasion could lead to hunger and unrest, with memories of how rising food prices played a role in several Arab uprisings in the last decade.

The price of sugar, which is also important in the baking industry, has also surged in Tunisia.

A staff member serves customers at the bakery. Libya, Morocco and Algeria are also facing wheat price increases.

Tunisia is facing immense pressure from international donors, including the International Monetary Fund and the EU, to make reforms that could jeopardise social peace, said economist and member of the Tunisian Forum for Economic and Social Rights Abdeljalil Bedoui.

“The extortion of the Tunisian state has become evident and humiliating to national dignity,” Mr Bedoui told journalists at a press conference on Wednesday.

Talks with Tunisia regarding an IMF bailout stalled months ago after Tunisian President Kais Saied on several occasions refused proposed terms that were key to the deal.

Mr Saied rejected the fund’s conditional financial package which seeks to push his government for more austerity and cut public spending.

However, the key terms that Mr Saied described as “foreign diktats” were initially included in the proposal made by his government in the early stages of talks between Tunisia and the IMF for a $1.9 million bailout loan.

The President’s rhetoric contradicts the projects his government is proposing … The rejection also comes in the absence of any sort of alternatives, which are needed for such stances to make sense on the ground

Abdeljalil Bedoui,
Tunisian economist

“The President’s rhetoric contradicts the projects his government is proposing … The rejection also comes in the absence of any sort of alternatives, which are needed for such stances to make sense on the ground,” Mr Bedoui said.

However, the IMF’s proposed deal has been criticised by Tunisian experts and citizens, who perceive its terms – such as the gradual removal of the subsidies system and subjecting the public sector namely health and education to growing austerity measures- as a hard blow to their purchasing power and their capacity to survive amid an exacerbated economic crisis.

Subsidies row

“The IMF only wants to protect its interests in Tunisia and have guarantees that we will be able to pay our previous debts which have become a burden to the public finances and is ominous of the incapacity of the state to pay it back,” Mr Bedoui added.

Meanwhile, the IMF has long argued that the use of subsidies to provide cheap fuel, electricity and food to citizens is an uncessary drain on public resources, that could otherwise be invested in growth-promoting economic sectors, such as education and building new infrastructure.

“It [subsidies] can distort markets, prevent efficient outcomes, and divert resources to less productive uses … They also create opportunities for rent-seeking behaviour – activities that manipulate the distribution of economic resources to bring positive returns to individuals, not to society – and harm smaller economies that cannot afford to subsidise,” said an IMF report released this month.

This argument, however, has been widely criticised by local experts who believe that even the gradual removal of a subsidies system that has been in place for more than 50 years might generate social unrest and further widen the gap between the rich and the poor.

Tunisia has experienced protests and civil disobedience throughout different periods of its history, triggered by attempts to remove subsidies from certain basic goods. In some cases, people have even lost their lives in the unrest.

“Almost every country that adopted austerity policies in the past showed the failure of such policies, which have led to an increase in poverty and public indebtedness,” Mr Bedoui explained.

According to Mr Bedoui, change in Tunisia’s financial system should not come at the expense of the social and developmental aspects.

Tunisia’s worsening economic situation has pushed it to seek out loans from international lenders to pay other debts.

This has left little room for successive governments to make progress in development projects and public investments.

According to figures from the National Statistics Institute, Tunisia has only had a 0.7 development growth rate over the past decade.

The status quo has caused an ongoing deficit in the state's public funds and constant dependency on international lenders to avoid collapse.