War in Ukraine, agreement with the IMF: Tunisia’s economy is in a vice

AGAINSTs Tunisians feared this, confirmed the Ministry of Industry, Mining and Energy 1uh A march that he will adjust the selling price of fuel at the gas station as the price of a barrel of oil continues to rise under the influence of the war in Ukraine. Last week, the price of Brent crude fluctuated from $98 (88 euros) to $104 (93 euros). But in itself this explanation does not characterize the situation in Tunisia. This is the second increase in a month, an extremely rare occurrence in Tunisia, and confirms the government’s intention to reform its subsidy regime, which also extends to bread, electricity and sugar, as it negotiates with the IMF a new loan needed to rescue the economy.

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The relevance of easing the burden of hydrocarbon offsets

Indeed, Tunisia hopes to strike a deal with the IMF by April, but with a Russian invasion of Ukraine pushing oil above $110 a barrel, the country’s financial reserves could be depleted faster than expected. Maintaining the current level of subsidies is proving all the more difficult as the state itself struggles to balance its budget and is facing a major multifaceted crisis following the July 25 coup of President Qais Syed, who assumed full power following the resignation of his government and the suspension of parliament. Several sources mention a monthly increase in fuel prices of 3%.

The sharp rise in oil prices due to the crisis in Ukraine will have a “serious impact on public finances,” a government official told Reuters on condition of anonymity. The Energy Ministry said that every dollar increase in the price of a barrel of oil creates additional needs to the state at about 140 million dinars, or $48 million. WhileThe 2022 budget is based on an average oil price of $75 per barrel. The situation is all the more critical because, according to experts, other increases in hydrocarbon prices are already planned this year. The whole question is how long the war will last and how much the price of oil will rise.

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Serious socio-economic consequences

In any case, this is a blow to the purchasing power of Tunisians, who are already experiencing rising prices for basic products. “In Tunisia, when oil goes up, they automatically raise prices, and when it goes down, we support it without cutting anything. The feeling that you are being ripped off in your own country, ”a Tunisian Internet user comments on social networks. Lotfi Riahi, President of the Tunisian Consumer Awareness Organization (Otic), abounds. “Tunisia is going through an extremely difficult economic situation and it is the citizen who suffers from these conditions. We call on the government to announce new decrees to ease this pressure and maintain purchasing power,” he said in Tunisie Numérique. A social explosion is brewing for the Free Desturian Party (PDL). In a statement, the party accused the head of state of “neglecting the economic and financial priorities of Tunisia, as well as the consequences of the general situation in the world for the situation in Tunisia, which could cause a social explosion in the country.” . The party called for a protest march on 13 March “to demand an official and detailed timetable for ending the state of emergency by dissolving parliament and calling for early elections to “resist the falsification of the will of the people”. .

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Tunisia can no longer back down from reforms

The Tunisian economy is feeling bad. And its future now depends on a future agreement with the International Monetary Fund due to be signed in April. At the end of 2021, Tunisia was in debt at 100% of GDP, its trade balance was €413m negative, unemployment topped 18%, and growth hit a painful 0.3%. “We have made good progress and will continue our discussions in the coming weeks to consider the prospects for possible financial assistance,” the IMF said in a statement following a virtual visit in mid-February. Discussions with the foundation are only at a preliminary stage, as the institution needs to fully “understand” the reforms proposed by Tunisia in exchange for a third aid program in 10 years. In the spring of 2021, Tunisia had already requested a new $4 billion bailout program, in exchange for which the IMF called for “deep and structural reforms.” In particular, the IMF pointed to the very high level of the payroll for civil servants (16% of GDP, 650,000 civil servants) and called for a review of the system of subsidizing basic products, especially energy. The influential trade union center UGTT in Tunisia has already said it will oppose any freeze or cut in the wages of civil servants and cuts in subsidies for basic necessities.

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