How can Tunisia rebuild its economy?

Some blame an IMF loan as the main reason Tunisia’s government included strict austerity measures in its 2018 budget.

Collapsing tourism revenues, unemployment, militancy and social unrest have hammered Tunisia's economy [Zoubeir Souissi/Reuters]

Tunis, Tunisia – Tunisians have taken to the streets across the country this month to demand the government overturn strict austerity measures that have jacked up prices and taxes.

Protesters chanted “work, freedom and national dignity” and “people want the fall of the budget” in the capital, Tunis, this week, during a commemoration marking the seventh anniversary of the Tunisian revolution.

For many across the country, the economic situation has gotten worse, not better, since the uprising that toppled Tunisia’s long-time president Zine El Abidine Ben Ali in 2011.

The current economy has created a “state of suffocation” among Tunisians, said Ahmed Ben Ammar, a human rights activist and civil society organiser in Tunis.

Ben Ammar told Al Jazeera people are frustrated because they feel like they are shouldering the financial burden, especially through an increase in the value-added tax, while Tunisian businessmen and companies benefit from tax breaks.

The government’s budget for 2018 increased taxes and the price of basic goods, including food and gasoline.

Tunisia’s economy: Tourism slumps as PM seeks to calm protests

“Tunisia has to create a new group of businessmen to create and protect the prosperity of the country,” he said.

The National Institute of Statistics put the unemployment rate in Tunisia at 15.2 percent in 2015, the year the country last conducted a national census, data analyst and civil society activist Aymen Saleh told Al Jazeera.

About 10 percent of residents in urban areas were unemployed that year, while in rural parts of the country the unemployment rate averaged 26 percent, the figures showed.

In January 2017, inflation in Tunisia was at 3.8 percent, but by the end of the year, it nearly doubled to 6.4 percent. National inflation is expected to reach between 9-12 percent in 2018, Saleh said.

“That means that purchasing power is becoming more and more deteriorated. Our money is losing its value and the price of products will explode,” he explained.

‘Constant IMF pressure’

Many activists have pointed to a loan from the International Monetary Fund as a large part of the reason Tunisia’s government included strict austerity measures in its 2018 budget.

In 2016, the IMF agreed to a four-year, $2.8bn agreement with Tunisia, which in turn agreed to increase the independence of its central bank, restructure three public banks and adopt an “equity-enhancing tax strategy”, the IMF said after the deal was finalised.

The Tunisian Observatory of Economy, which monitors policies of international financial bodies in Tunisia, reported in August, however, the IMF has been exerting “constant pressure” on the Tunisian Central Bank to devalue the dinar.


From when Tunisia signed an IMF loan in 2014, until an IMF country review in July 2017, the Tunisian currency lost 49 percent of its value compared to the US dollar, the group said.

The IMF argues that lowering the dinar’s value will help close the gap in Tunisia’s trade deficit by making exports more competitive and increasing the price of imports, thus reducing import levels overall, the Observatory said.

But the group recently said devaluing the dinar had the opposite effect: it increased the deficit and trade fell by $1.1bn in 2016.

“Then we entered a vicious circle where the more [the] Tunisian dinar falls, the more [the] trade deficit increases and the more [the] IMF asks to devaluate the Tunisian dinar,” explained Chafik Ben Rouine, president of the Observatory.

Asked to comment on criticism that its economic policies have harmed Tunisians, the IMF directed Al Jazeera to comments made by a spokesperson last fall.

“The IMF has never recommended reducing food subsidiaries in Tunisia under the current programme,” Gerry Rice, head of the IMF communications department, told reporters in November.

For its part, in response to the protests this month, Tunisia’s government recently pledged to boost aid to poor families by $70.3m, an investment the state said would impact nearly 250,000 families, and provide better healthcare to all Tunisians.

But Ben Rouine said all the economic reforms passed by the Tunisian parliament since the 2011 revolution have been austerity measures because “international financial institutions were framing the agenda”.

“There is a strong continuity between the nine governments that followed each other since 2011,” he told Al Jazeera.


“That’s why people feel that nothing changed on economic issues.”

Tourism, public sector jobs down

The Tunisian economy has also taken a hit because its tourism sector has been in crisis since 2015.

In March that year, gunmen attacked the Bardo National Museum in the capital, killing 21 people, and a few months later, attackers opened fire on a seaside resort near the coastal city of Sousse, killing almost 40 others.

Tourism revenues fell by 35 percent in 2015, compared to the previous year, and the number of tourists visiting Tunisia dropped by 30 percent, to 4.2 million people, the ministry of economy reported.

By comparison, nearly seven million tourists visited Tunisia before the revolution in 2010.

While the industry picked up slightly in 2016, the tourists that chose Tunisia – mainly Algerians and Russians – were coming on “all-inclusive” deals so “the impact on the local economy is thus very limited”, the ministry said.

Tunisia also saw an uptick in French and German tourists last year.

Today, more than 35 percent of Tunisians aged 15 to 24 are unemployed, the World Bank reported.

The government has also announced a hiring freeze in the public sector, a major source of employment since Tunisia gained independence from France in 1956, as part of the 2018 budget.

That decision has drawn the anger of many unemployed youths.

Fadil Aliriza, a Tunis-based independent journalist and researcher, said he expects the Tunisian government to back down on some economic measures that have pushed people onto the streets this month.

But the state also has “limited power” over the economic powers that be, namely the Central Bank of Tunisia, he explained.

In April 2016, the Tunisian parliament passed a law giving the bank more independence from the government.

The move – which gave the bank total control over monetary policies and shields it from political interference – was largely seen as a way to appease Tunisia’s international lenders. In fact, it was drafted with IMF support.

“They meant independent of the government, but not necessarily independent of lenders, who are having quite an oversized role in terms of economic policy,” Aliriza told Al Jazeera about the measure.

Tackle corruption, diversify trade

For his part, Saleh said Tunisia must get serious about tackling corruption and tax evasion if it wants to improve the economy. That means addressing corruption everywhere, especially in business and politics.

For years, the country “made laws for the Trabelsis and the Ben Alis”, said Saleh, referring to former president Ben Ali and his brother-in-law, businessman Belhassen Trabelsi.

“We need to revise the state’s economic policies, especially tax evasion. If we can manage to make the businessmen pay their taxes, everything will be solved,” he said.

According to Ben Rouine, Tunisia must also diversify its trade relationships if it wants to climb out of debt.

Currently, European Union countries figure atop the list of Tunisia’s most significant trading partners. Tunisian exports to France totaled $4.3bn in 2016, or about one-third of total outgoing products.


“Since our trade relationships are mainly based on sea trade with the EU, all the economic activity is concentrated on coastal cities,” Ben Rouine said.

Deepening ties to Libya and Algeria would help “reduce the economic isolation” of Tunisia’s interior regions. The government should also look to develop its own economic strategy independent of international financial institutions, he said.

Ben Ammar, the civil society organiser, said asking Tunisians how to solve the country’s economic woes was akin to asking Egyptians how to loosen the control of their army – both are deep-rooted problems without simple solutions.

But he said he’s witnessed a shift in political consciousness in Tunisia, as people are increasingly looking to local politics as a way to find solutions. That’s why he thinks municipal elections scheduled for May across Tunisia could prove important.

For now, however, the economy is hurting many Tunisians and the government is under pressure to find a solution – or risk more waves of unrest.

“[Tunisians] can’t afford to live anymore. They can’t afford basic goods,” Aliriza said.

“There’s no way around that.”

Source: Al Jazeera