The International Monetary Fund (IMF) loan which Tunisia is working to obtain will help the country’s general budget but not solve its economic crisis, former Minister of Trade and a member of the Political Bureau of the People’s Movement Party, Mohamed Msilini, has said.
“Deep and comprehensive reforms” are needed to get Tunisia out of its current crises, he added.
In an exclusive interview with Arabi21, Msilini confirmed that “negotiations with the IMF will soon end with an agreement between the two parties, and all indications and statements point to that, but it is expected that the amount may not exceed $3 billion or a little less.”
“Cancelling subsidies for consumables is almost impossible, and the only possible solution is to search for a mechanism to increase wages and people’s purchasing power instead of subsidising consumables,” he explained.
In early July, official negotiations started between the IMF and Tunisia to reach an agreement to obtain a $4 billion loan to complete its 2022 budget.
According to press reports, the IMF will likely agree to granting Tunisia the loan during its ongoing meetings, which are being held between 10-16 October.
Tunisia is suffering from an economic and financial crisis that has been exacerbated by the repercussions of the COVID-19 pandemic and the war in Ukraine, in addition to the political instability that the country has experienced since President Kais Saied imposed exceptional measures on 25 July 2021.
Details of Msilini’s interview can be found below:
How do you see the economic crisis in Tunisia today?
The economic crisis in Tunisia is complex. On the one hand, it is a legacy of many years before the revolution, which built a fragile economy linked to the global economic cycle and became highly affected by its crises. However, the failure that accompanied post-revolutionary governments and their continued insistence on relying on a developmental method that proved to be a failure and led to a comprehensive revolution in 2010, accumulated the problems of Tunisia’s economy and deepened its troubles. Among the most important aspects of this stage is the alliance of well-known and influential political parties with the barons of profits, corruption, looting and tax evasion.
The global crisis caused by the COVID-19 pandemic and the Russian-Ukrainian war contributed to deepening the problems of the Tunisian economy. Finally, we cannot ignore the absence of political and social stability, which represents the mainstay of every economic activity.
Negotiations are still ongoing with the IMF to get a $4 billion loan to complete the Tunisian budget. Will Tunisia succeed in its negotiations with the IMF?
I believe that negotiations with the IMF will soon culminate in an agreement between the two parties since all indications and statements point to that, and the signing of the agreement is very close. However, the amount of the loan may be less than what you mentioned in your question, because it may not exceed $3 billion or a little less.
How do you see the nature of the IMF’s terms and their possible effects?
Of course, the IMF has a set of terms or proposals that are known in all its experiences with developing countries in particular, including the balance of public finances, which is represented by controlling state expenditures through controlling wages, support expenditures. However, what is certain is that the Tunisian economy needs deep reforms that include many and multiple areas, due to the terms of the IMF or without them.
Reaching an agreement with the IMF will enable the government to cover part of the needs of the general budget (2022-2023) and open prospects for it to connect to the financial markets. But in return, it will deepen the problem of debt and the already high debt servicing, and may lead to great social tension if the government adheres to all the requirements of the IMF.
What is the reason for the disruption in negotiations with the IMF?
The negotiations disruption with the IMF is due to two main factors: the first is related to political instability, as governments do not live long, and the second is related to Tunisia’s experiences with the IMF after 2011. Two agreements were suspended as a result of the government’s failure to fulfil the obligations stipulated in the agreement and letters of intent.
To what extent will the expected loan by the IMF contribute to saving Tunisia from its financial crisis?
The IMF loan will help in solving the budget needs, but it cannot solve the Tunisian economic problem, and will not save Tunisia from its financial crisis unless adopting deep and comprehensive economic and social reforms to fill the large deficit recorded over more than 20 years.
Is it possible to cancel subsidies on basic materials before increasing wages? And what if that happened?
Of course, it is difficult to cancel subsidies, and it is almost impossible to do so. The only possible solution is to search for a mechanism to support wages and purchasing power instead of subsidising consumables, or what is called directing subsidies to those who deserve it.
In your opinion, what are the government’s options in dealing with the current economic and social crises?
The current government is an interim government to manage an exceptional phase, which I hope will end after the upcoming elections, and I hope a political government capable of carrying out its duties and facing its challenges will be formed.
This interview first appeared in Arabic in Arabi21 on 9 October 2022