Reforms are being sought to alleviate the complicated national situation, but there is no clarity about the implementation and effect of these measures and this generates unrest among the population

Tunisia: economic stagnation, shortages and popular discontent

photo_camera REUTERS/JIHED ABIDELLAOUI - Tunisia is in deep recession, rising prices and job losses have hit families already struggling before the coronavirus pandemic

Tunisia is facing a worrying financial crisis and a lack of basic commodities.  

Tunisia has been experiencing economic problems for years that are seriously affecting the country. The inflation affecting the nation is serious, there are shortages of various basic products, unemployment is plaguing the population, especially young people, and all this is generating significant unrest among citizens, who have already staged numerous local protests in certain areas that may become generalised and take on a greater volume at the national level.  

According to analysts, there are fears in Tunisian political circles that the country's financial problems, lack of resources and the rising prices of various products could lead to protests that are larger than those currently taking place more locally, as pointed out by media outlets such as Al-Arab.  

Tunisia, facing its worst financial crisis in years, is seeking a new loan from the International Monetary Fund (IMF) to prevent the collapse of public finances. In the past, the IMF has dictated a series of reforms for the North African nation, which have been postponed by various national governments until now, creating a complicated situation in the national economic fabric. These reforms proposed by the IMF were aimed precisely at unblocking the Tunisian economic situation.  

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Official figures indicate that in the North African country a third of the population is poor, that is, more than four million Tunisians already live in poverty or are on the threshold of poverty. Moreover, in 2022, unemployment figures exceeded 16% and inflation stands at 8.6%, according to recent statistics.  

Tunisia ended August with an inflation rate of 8.6%, 0.4% higher than in July. According to the National Institute of Statistics, this boom was related to price increases in food and beverages. The value of poultry meat rose by 9.4%, while beef rose by 1.6%; on the other hand, the price of eggs rose by 2.8% and that of fish by 1.8%. Like many countries in the region, due to the international context marked by the war in Ukraine, Tunisia has also experienced an increase in the price of cereal products. Inflation also affects the prices of furniture, household equipment and services, which rose from 10.6% to 11.3% in August, and the value of educational materials and services, which rose from 9.8% to 10%. Other products have not been affected as much, with prices even falling, but the most basic products, especially those related to food, are reaching levels that make it difficult for a large part of the Tunisian population to buy them.  

Tunisia's power, headed by the nation's president, Kais Saied, faces a major challenge after he personally took control of the nation after suspending parliamentary activity in July 2021 and beginning to rule by decree, all after past executives failed in their duties and ended up giving in to their inability to govern the country and accusations of alleged corruption. Even those citizens who supported President Saied after his power grab are complaining about the current economic situation and the executive's inability to cope with rising prices. 

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President Kais Saied has proposed a series of measures aimed at fixing the country's difficult economic situation. The Tunisian leader called for raising the standard of living of citizens to help the most disadvantaged, who have struggled to access certain basic services in health, education and transport in recent years, by reforming various sectors through subsidies. 

International observers have noted that Tunisia has the potential to implement certain measures to end the economic recession. But to promote greater social and economic equity, the government must do more to encourage investment and subsidies and options that can generate more employment. Fawzi bin Abdulrahman, an economist and former Minister of Vocational Training and Employment, told Al-Arab that "increasing subsidies is the right step to take, and its effects will be positive on the balance sheet, given the presence of corrupt practices in the system". 

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Various sectors are showing their discontent with protests and are demanding that the government led by Prime Minister Najla Bouden, appointed by Kais Saied, inject more money to control prices and facilitate access to basic products and services, something that is very complicated due to the country's financial crisis, the devaluation of the Tunisian dinar and the rise in prices and generalised crisis linked to the Russian invasion of Ukraine, which has led to an increase in the price of energy resources and various raw materials and products. The suffocating local and global crisis is palpable and seriously affecting North Africa.

The increase or reduction of subsidies may greatly affect the poor and the determinations made by the government may be decisive and may or may not lead to stronger street protests.

According to Al-Arab, observers have doubts about the fate of much of the funds allocated by the IMF to alleviate Tunisia's economic situation. They point out that this issue could pit the people against the government, with reports suggesting that 80% of the allocations will not reach the most needy. These experts believe that the government should be sincere about the reforms demanded by the IMF and explain them to the people so that they can see what benefits they will bring in the future.  

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The timing is now difficult for Najla Bouden's government to implement reforms. Tunisia, facing its worst financial crisis, is looking to the IMF's long-awaited loan to prevent the collapse of public finances. 

In this regard, the ratings agency Fitch Ratings recently indicated that Tunisia is likely to obtain a new IMF loan, which would be the third in the last ten years, after the government and the trade union UGTT agreed on wage increases in the public sector after months of disagreements. 

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"Tunisia will continue to benefit from international support and will be able to conclude an agreement with the IMF in the second half of 2022, unlocking additional financing from official creditors in November-December," the agency said in a note.

However, Fitch Ratings was concerned that the delay in closing a loan and implementing the required reforms would lead to a deterioration in debt sustainability that could lead the IMF to demand a debt restructuring as "signs that a default is becoming more likely could result in a downgrade of the 'CCC' rating". 

Najla Bouden's government agreed to a 3.5% wage hike for civil servants and public company employees between 2023 and 2025 and a 5% increase in the minimum wage, set at 400 dinars (about 125 euros), starting next October. 

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Tunisia thus hoped to obtain a loan valued at 3.6 billion euros that would make it possible to deal with a record public debt, aggravated by the pandemic and the crisis in the supply of basic commodities such as cereals.  

However, the scenario is currently difficult for undertaking certain reforms. This month, the government raised the price of cooking gas by 14% for the first time in 12 years and also raised fuel prices for the fourth time this year as part of a plan to reduce energy subsidies, an important guideline demanded by the IMF. 

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Protests by the population

National tension is high. Numerous demonstrators took to the streets in the most deprived areas of the Tunisian capital in recent days to protest against poverty, high prices and the disappearance of foodstuffs from shops, in an escalation of pressure on the Tunisian authorities at a time when the country is facing a serious economic and political crisis. 

Protesters staged riots to demonstrate their impotence in the face of rising prices and the lack of concrete action by President Kais Saied. 

In the latest protests, slogans such as "occupy freedom, national dignity", "shame, shame, prices have lit the fire" or "where is the sugar?" were chanted. 

 

Citizens are concerned that food shortages in Tunisia are on the rise, with empty shelves in supermarkets and scenes of Tunisians searching for sugar, milk, butter, rice and oil. 

Tunisia, like other countries, is suffering a severe economic crisis accentuated by the consequences of the coronavirus pandemic, as well as the high cost of energy and other basic goods as a result of the war in Ukraine. 

The Russian invasion of Ukrainian territory aggravates the food situation because Tunisia was importing half of its cereal consumption from Ukraine and Russia, adding to soaring inflation and skyrocketing youth unemployment. Rationing of basic commodities has been in place since March in response to the lack of supplies, and this is only adding to the protests.  

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Measures to contain high prices

President Kais Saied pointed to the food supply as an issue to focus on at a time when the most basic foodstuffs, such as bread, are in short supply in the shops, following the aforementioned popular protests against the lack of products and escalating prices.  

Kais Saied also called on the Najla Bouden government to impose restrictions on imports of luxury goods to reduce the balance of trade deficit with several countries, stressing the need to secure the supply of goods for the markets and tackling existing monopolies and abuses. He also questioned how it is possible to allow the absence of basic necessities and foodstuffs, while in other areas special pet food is being supplied or cosmetics imported from foreign firms, as the president himself explained in a communiqu茅 issued by the Tunisian presidency.  

The message was aimed at greater equity and shared responsibility in the face of the severe economic crisis. "If there are difficulties and the whole world is witnessing difficulties in various sectors, then the whole nation must bear these conditions on the basis of social justice," the communiqu茅 said. "National duty demands that each party feels its responsibilities and that we shoulder them as citizens who feel part of the homeland and do our utmost to overcome these crises," the communiqu茅 added.  

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Tunisia must generate wealth to improve the situation of its citizens and their living conditions. "Marginalised groups constitute almost two thirds of Tunisians, who are capable of shaping the political landscape in the country in the coming months and years, either by voting or by switching to the other side of the street, and if the government and the president want to stay in power, they should only change the reality of these groups for the better or at least reassure them by providing signs of change, which we hope will be very soon, especially as the time factor is plaguing the government and the president," as activist Hatem al-Meliki pointed out.  

The situation in the aftermath of the COVID-19 pandemic, coupled with the war-driven rise in energy and grain prices, could lead to major waves of protests in the most affected countries. As Atlantic Council analyst Kamal Alam told CNBC: "Inflation and economics, rather than political freedom, are key". "The first and foremost reason for unrest in the Arab world is always the lack of economic mobility," he added. 

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