Bread, debt and politics create a volatile mix in Tunisia
(Bloomberg) – Across North Africa, bakeries are purveyors of subsidized daily food and a barometer of public mood.
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So when Tunisian President Kais Saied sought to counter reports that staples like flour had become scarce as Russia’s war on Ukraine deepened his country’s economic crisis, a bread maker well-stocked Tunis, where he used to shop, provided a useful backdrop.
Or so he thought. As the bakery owner last month gently insisted the shortages were real, an unsmiling Saied in a dark black coat was forced to attack profiteers ‘starving the people’ by driving up the prices. price. After accusing political opponents of fomenting the shortfalls, the former law professor walked away with four loaves of bread and an ear full of criticism from passers-by.
The war in Ukraine is accelerating Tunisia’s collapse as energy and commodity prices rise and the supply of basic commodities tightens globally. Inflation is close to a record level and the deficit is expected to double, while 40% of under-25s are unemployed, threatening a new exodus of migrants across the Mediterranean to Europe. Above all, talks with the International Monetary Fund on a bailout plan are stalling.
Rising food costs are pushing vulnerable populations in the Arab world to breaking point
Two weeks after the visit, Saied dissolved parliament after lawmakers convened in virtual defiance of his July 2021 order suspending the assembly, an act that has been branded a coup by rivals including Israel. influential Islamist party Ennahda.
Nearly a year after derailing a fragile democracy dating back to the first salvo of the Arab Spring and seizing executive power, Saied appears to be at a standstill. Critics say he is unwilling or unable to rebuild the political consensus needed to pull the economy out of the quagmire.
Patience is running out.
“We just want to live,” said Bahaa, 28, a clothes seller in the rowdy Ettadhamoun neighborhood in the capital. He only gave his first name in a country where the crackdown on dissent has intensified. “If the situation persists, the young people will go to the presidential palace with throwing stones.”
In January, police used tear gas and water cannons to disperse hundreds of protesters in the capital marching to mark the country’s Arab Spring uprising and demanding Saied reverse his power grab. Since then, economic conditions have worsened further. Taxi drivers have protested against rising fuel prices, public sector workers have seen delays in paying their salaries and queues for bread have lengthened as supply dwindles .
Middle East and North Africa at risk of unrest from rising food prices: map
Saied, 64, resisted tackling the issue. He avoided potential allies within the powerful UGTT union and minority parties. Instead, he is pushing ahead with his “decentralization” agenda, which seeks to weed out the bickering political groups he blames for bankrupting Tunisia since its 2011 revolution and put power in the hands of local committees. .
Multiple attempts to discuss the issues raised in the article with presidential, government and central bank officials have been unsuccessful. UGTT officials declined to comment.
Investors aren’t happy either. They punished Tunisian bonds, fearing that a spike in food and energy prices, and the loss of Russian tourists, could accelerate the cash-strapped sovereign issuer into default. Tunisia’s economy is now less than 90% of its size before the uprising more than a decade ago, while the ratio of public debt to gross domestic product has nearly doubled to around 88%, with the IMF predicting that it will reach 99.7% in 2025.
Hunger and power outages are the start of an emerging economic crisis
The highest commodity prices in decades are eating into foreign exchange reserves, which are now sufficient to cover four months of imports. They are low enough to cause investors to worry about the sustainability of Tunisia’s external debt pile.
IMF talks delayed
Back home, the mood is so bleak that “there is no guarantee that Tunisians will accept the reforms that a new program with the IMF will entail,” said Youssef Cherif of the Columbia Global Centers research initiative. “The fact that there are talks in itself is a sign that Saied wants a new agenda,” he said. “But if the reforms are rejected, he will blame his government.”
Soaring import costs mean the budget deficit could nearly double to 20 billion dinars ($6.6 billion) this year, surpassing the $4 billion the authorities say they are asking the IMF for. A deal of this size already looks ambitious given Tunisia’s withdrawal quota with the lender, indicating that the government could request assistance under the IMF’s exceptional access framework, which would likely bring even more stringent conditions. more difficult.
A Western diplomat familiar with talks between Tunisian officials and G-7 countries said Saied seemed to believe he could fix the country single-handedly, describing him as lacking trust in others. The diplomat acknowledged that officials were working “hard” for a new IMF program, but said there was reluctance to tackle painful issues such as indebted and bloated state-owned enterprises that are a stronghold of the UGTT.
“The UGTT will be instrumental in shaping how things go for Saied,” said Hichem El-Ajbouni, one of the lawmakers seeking to restore parliamentary powers. The reform of public enterprises “is necessary but difficult”.
Tunisia rules out debt overhaul in any IMF deal, says investor
According to a person familiar with the process, the economic damage caused by the war has delayed technical talks with the IMF by about a month as Tunisian officials seek to finalize the measures they pledge to take.
But authorities, who had set an April target date for a deal, must also provide assurances that they can secure a broad national consensus for needed reforms, said the person, who asked not to be named.
The person saw no risk of default as most of Tunisia’s debt is medium to long term, but acknowledged success was not guaranteed. If negotiations near the parliamentary elections Saied plans to hold in December – if he can adopt a new constitution in advance – there will be further delays.
This is expected to test the loyalty of Tunisians like Monjia Moqni, owner of the capital’s Royal Poultry food store, who backed the takeover of Saied last year.
As she hung a poster of the president promising buyers lower prices, she told herself that “business hasn’t been good,” especially after prices rose again due to the war. “This is the most difficult Ramadan for Tunisians.”
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