The European Parliament’s fears of Tunisia’s economic collapse are exaggerated, said former trade minister and economic expert Mohsen Hassan, adding that despite the country’s difficult economic situation, like of most states in the world as a result of external factors (Covid-19 and the Russian-Ukrainian war), the current situation in our country has not reached the phase of collapse.
On Monday, 20 March 2023, Josep Borrell, High Representative of the European Union (EU) for Foreign Affairs and Security Policy declared that “the European Union is concerned about the deterioration of the economic and political situation of Tunisia and fears a collapse of the country”, while warning that “the collapse of Tunisia would lead to an upsurge in migratory flows”. Borrell also warned that the EU will not be able to help Tunisia if it proves unable to sign an agreement with the International Monetary Fund (IMF).
In a statement granted to the Tap agency, Hassan specified that these foreign crises have had an impact on Tunisia, given that its economy is open to the world and have caused a slowdown in growth, estimating the achievement, in 2023, with a rate of 1.6% against 2.2% in 2022.
Tunisia has fulfilled the conditions required by the IMF
The economic crisis in Europe has contributed to the regression of the country’s external demand, especially since the regression of growth in Europe by one point leads to a drop in growth of nearly 0.7% in Tunisia, a he explained.
In the same context, Hassan added that the Tunisian economy is also stumbling due to endogenous factors, the most important of which are the widening of the current energy deficit and the deterioration of public finance balances, in addition to the worsening of the food trade deficit, due to the drought recorded in recent years.
He continued that Tunisia is recording an increase in the inflation rate which reached 10.4% in February 2023 and in the unemployment rate, which exceeds 15%, which has contributed to the imbalance of the State budget and led to the recourse to credits (internal and external).
The expert said he was surprised by the fact that the IMF, which did not grant Tunisia the expected financing ($1.9 billion over four years), while the country had fulfilled the conditions and respected its old commitments, recalling in this regard that the IMF granted this week a credit to Sri Lanka of 2.9 billion dollars despite the financial difficulties that this country is going through and another financing to Ukraine of 15.6 billion dollars.
According to Hassan, Tunisia will obtain an agreement from the IMF in the coming weeks, given that it has fulfilled all the technical conditions relating to the implementation of a program of reforms, the adoption of the law relating to public enterprises, and the implementation of economic reforms in the 2023 finance law. He added that the support of European countries, particularly Italy, and the United States will increase the likelihood of obtaining this credit, specifying that the conclusion of an agreement with the IMF will open the doors for Tunisia to conclude new bilateral and multi-party agreements with other donors, such as the Islamic Bank, the African Development Bank (AfDB) and the Gulf countries, and to go out on the international market and improve its sovereign rating.
Alternative solutions exist
Hassan indicated that the difficult economic situation should not hinder the implementation of the structural reforms agreed with the IMF, stressing the imperative to accelerate the improvement of the business climate and competitiveness, to establish tax equity, to fight against tax evasion the parallel economy, and to reform the subsidy system which has not yet started while this reform is decreed in the 2023 finance law.
For the economic expert, even if Tunisia did not obtain credit from the IMF in time, alternative solutions exist. The government can issue a bond loan in foreign currency intended for the diaspora so that it participates in the mobilization of the resources of the State, and by encouraging them to boost the national economy, especially since the transfers in foreign currency from the diaspora to Tunisia in 2020 reached $9.5 billion, representing nearly 20% of Tunisia’s foreign exchange reserve.
Hassan also called for exploiting underground resources efficiently, solving the problem of transporting phosphate through traditional means (railways), and thinking about other solutions, particularly through pipelines, to support the agricultural sector, rationalize imports and upgrade the tourism sector, through investment in quality and training.
The State must also make a decision regarding its contribution to public enterprises, taking into consideration its economic performance with the possibility of being satisfied with vital strategic sectors and renouncing competitive sectors, the expert concluded
