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Tunisian president Kais Saied needs clear plan to navigate looming fiscal crisis

Published: Updated:

At the Sidi Bahri market in Tunis, shoppers were pleased with the president’s attacks on corruption and high prices since he seized control of the government last month in moves his foes called a coup.

President Kais Saied has criticized Tunisia’s economic policy, urged traders to charge less for food and medicine and accused unnamed businessmen of stealing billions of dollars while police are investigating corruption in state industry.

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“The citizen feels reassured and prices have gone down in everything,” said Azza Belwaer, a 36-year-old medical equipment vendor buying groceries in Sidi Bahri.

However, three weeks after Saied sacked the prime minister and froze parliament, he has yet to appoint a new government, articulate any broad economic policy or say how he intends to finance the public deficit and debt repayments.

Tunisia's President Kais Saied, center, leads a security meeting with members of the army and police forces in Tunis, Tunisia, Sunday, July 25, 2021. (AP)
Tunisia's President Kais Saied, center, leads a security meeting with members of the army and police forces in Tunis, Tunisia, Sunday, July 25, 2021. (AP)



His intervention has paused much-delayed talks with the International Monetary Fund (IMF) for a loan program that was expected to unlock further economic assistance and avert a crisis in public finances.

Tunisia paid back more than $1 billion in debt this summer from foreign currency reserves, but must find about $5 billion more to finance its projected budget deficit and more loan repayments.

The economy shrank 8.2 percent last year while a deficit of 11.5 percent drove public debt to 87 percent of gross domestic product, according to the IMF. Both the powerful labor union and foreign lenders see little choice but to resume the IMF process.

“We support negotiations with the IMF... we have no options,” said Mohamed Ali Boughdiri, deputy head of the UGTT union.

“The clock is ticking on the economic challenge,” said a Western diplomat, adding the reforms needed to secure an IMF loan would be important in gaining more assistance.

Mohamed Ali Boughdiri, deputy head of the UGTT union, attends an interview with Reuters in Tunis, Tunisia August 16, 2021. (Reuters)
Mohamed Ali Boughdiri, deputy head of the UGTT union, attends an interview with Reuters in Tunis, Tunisia August 16, 2021. (Reuters)



Such reforms -- including redirecting subsidies and shrinking one of the world’s heaviest public sector wage burdens -- are unpopular and would come at a moment when the public mood is highly volatile.

Anger at economic stagnation, aggravated by the pandemic, helped drive apparently widespread popular support for Saied’s sudden intervention on July 25.

Successive governments have failed to resolve the problems, often pulled between the demands of foreign lenders and the UGTT.

Boughdiri said Saied had an opportunity to take advantage of “broad popular support” to propose urgent change, adding the UGTT backed some reform of state-owned companies and a review of subsidies.

It sees efforts to combat corruption, tax evasion and the informal economy as priorities, he said. Though the IMF has also urged efforts to reduce those, it sees tackling the public wages and subsidies as more pressing.

Whatever he does, Saied will now be held responsible for resolving Tunisia’s chronic economic troubles -- potentially undermining the political transformation in which he appears most interested.

“In the big picture, these events have unleashed enormous expectations. It’s going to be very difficult for him to meet those. He’ll need the help of Tunisia’s friends and an inclusive approach,” said the diplomat.

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