Tunisia's PM: Country can no longer rely on external debt

Tunisian Prime Minister Elyes Fakhfakh said yesterday he had decided against the use of more external debt and that all new expenses that arise for the country would be funded only through internal loans, Reuters reported.

He said that he will freeze increases in the wages of public employees because of the critical state of public finances which was made worse by the coronavirus crisis.

This move could spark a conflict with the powerful Tunisian General Labour Union (UGTT Union), which is expected to reject the decision, and could lead to protests and strikes.

Tunisia needs an additional 4.5 billion dinars ($1.59 billion) of loans because of the coronavirus crisis, and the government will seek it from the local market, he added.

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“External debt reached dangerous levels and now reached 60 per cent of GDP, compared to 30 per cent in 2013 and I decided not to continue in this way,” Fakhfakh said in an interview with Attessia TV.

Tunisia expects the economy to shrink by up to 4.3 per cent this year, the steepest drop since independence in 1956.

Tourism revenues fell by about 50 per cent in the first five months of this year compared to the same period in 2019, as western tourists deserted Tunisia’s hotels and resorts.

“Public finances are very critical and we cannot continue with the approach of increasing wages,” Fakhfakh said.