Factbox-Signs of a Tunisian economy in trouble
TUNIS (Reuters) – Public funds are beneath pressure and costs are hovering in Tunisia, presenting huge financial challenges to President Kais Saied as he plans to overtake the political system in a constitutional referendum on Monday.
Listed below are a number of the troubles affecting the financial system, which was hit significantly onerous by the COVID-19 pandemic as a result of its reliance on tourism:
GOVERNMENT FINANCES
Strains on Tunisia’s public funds have led to delays in state salaries and difficulties in paying for wheat imports.
The price range deficit is predicted to widen to 9.7% of GDP this yr from a beforehand forecast 6.7%, central financial institution Governor Marouan Abassi has mentioned. This is because of a stronger greenback and sharp rises in grain and vitality costs – knock-on results of the Ukraine warfare that Abassi has mentioned have generated a further $1.6 billion of financing wants.
State funds had been already stretched by one of many highest public sector wage payments on the planet in comparison with the dimensions of the financial system, and heavy spending on imported vitality and meals subsidies.
A weaker Tunisian dinar has added to the stress. The foreign money weakened to three.18 dinars to the greenback within the 12 months to July 14, a 13.2% decline.
The federal government hopes to safe a $4 billion IMF mortgage in change for freezing public sector wages and recruitment and slicing meals and vitality subsidies. However the highly effective UGTT labour union opposes the reforms, a big impediment.
DEBT SEEN MORE RISKY
The IMF mentioned final yr that Tunisia’s public debt would develop into unsustainable until reforms had been enacted with broad help.
Tunisia’s excellent public debt will attain practically 114.14 billion dinars ($40 billion) by the top of 2022, accounting for 82.6% of GDP, in keeping with the 2022 state price range, a rise from 81% in 2021.
Reflecting investor concern, spreads on Tunisian public debt – or the premium traders demand to carry it fairly than ultra-safe U.S. authorities bonds – are actually a number of the highest on the planet.
They’ve risen to over 2,800 foundation factors, nearly 3 times the 1,000 degree that usually units off the warning sirens.
Together with Ukraine and El Salvador, Tunisia is on Morgan Stanley’s prime three record of seemingly defaulters.
Some $3 billion price of Tunisian overseas foreign money debt is about to mature between 2024 and 2027.
Frozen out of worldwide markets, the federal government hopes an IMF funding settlement would unlock wider monetary help.
INFLATION CLIMBING
Tunisia’s annual inflation price has hit a sequence of report highs this yr, touching 8.2% in June.
The federal government has raised petrol costs 3 times this yr. It now prices 100 dinars to fill a typical four-door saloon in comparison with 93 dinars initially of the yr.
In Might, farmers in a number of areas protested on the excessive value of animal feed, and the federal government mentioned it could increase the costs of some meals together with milk, eggs and poultry.
Tunisia is especially susceptible to grain provide disruptions brought on by the Ukraine warfare, importing 60% of its delicate wheat and 66% of its barley from Russia and Ukraine, the World Financial institution says.
In June, the World Financial institution accepted a $130 million mortgage for wheat and barley imports.
POVERTY
Hardship is on the rise.
In an interview with an area newspaper in Might, the social affairs minister mentioned the variety of households in want had grown from 310,000 in 2010 – the yr the pro-democracy rebellion started – to greater than 960,000 right now. Shut to six million Tunisians, or half the inhabitants, are beneath the poverty line, he added.
Unemployment is excessive, hitting 18.4% in 2021, the World Financial institution says. It’s significantly excessive amongst youth, girls and within the west of the nation.
(Reporting by Tarek Amara and Marc Jones; Writing by Tom Perry; Enhancing by Frances Kerry)
