The economic secret that caused Tunisia’s turmoil | Business and Economic News

The economic secret that caused Tunisia’s turmoil | Business and Economic News


Lack of opportunities, especially for young people. Punish debts. A broken social contract. The pressure of the pandemic has made the situation worse.

This year, this economic secret is fueling social and political turmoil around the world. South Africa experienced this situation earlier this month. Cuba is too. Now it’s Tunisia’s turn.

Each of these countries has its own unique environment. But in the context of the Middle East and North Africa, Tunisia’s risk is very high.

After all, Tunisia is the birthplace of the Arab Spring, and is hailed as its only success story-the country got rid of its long-serving dictatorship, emerged from the flames of protest dedicated to democratic reforms, is legal like a phoenix, and Serving the people, not just an economy that serves corrupt elites.

But the phoenix never soared. There is a symbiotic relationship between political deadlock and economic weakness. They enjoyed each other, and in Tunisia, both sides became stronger in the process.

Since the Arab Spring, more than a dozen governments have run the country, but the economy has been sluggish.

According to data from the World Bank, the average annual economic growth rate from 2011 to 2019 was only 1.5%, which is impressive. Investment and exports have never regained their strength before the Arab Spring. Corruption is still rampant.

Then the epidemic hit.

According to government data, Tunisia’s economy shrank by 8.6% last year and another 3% in the first three months of this year.

Tourism is the cornerstone of the economy that brings foreign exchange, but it will be significantly reduced in 2020. Manufacturing—another pillar—has also been hit hard.

Tunisian security officials stop protesters outside the capital, Tunisia’s parliament building, on July 26, 2021, after the president took action to suspend the country’s parliament and remove the prime minister [File: Fethi Belaid/AFP]

By the end of last year, these pandemic interruptions pushed the official unemployment rate to 17.4%, compared with the pre-pandemic level of 14.9%. According to data from the National Bureau of Statistics, this proportion has risen to 17.8% in the first three months of this year.

But this number does not cover the entire range of despair and frustration that has swept young people across the country.

According to data from the World Bank, the youth unemployment rate in 2011 exceeded 42%. By 2019, it had fallen to about 35%, but the International Monetary Fund estimated that by the last quarter of last year, it had risen to more than 36%.

It was the young people in Tunisia that sowed and nurtured the Arab Spring. This year, a new generation of people took to the streets to protest against political inefficiency, corruption and chronic lack of opportunities.

At the same time, the country is now on the decline of the third and most serious wave of COVID-19 infections, with its healthcare system collapsing and implementing more lockdowns this month.

According to the latest data from “Our World Data”, in an alarming example of global vaccine inequality, only about 7% of Tunisians are fully vaccinated.

The government is trying to reduce the economic loss caused by the loss of jobs and income due to COVID restrictions by expanding the existing cash transfer program to troubled families. The International Monetary Fund and the World Bank have been supporting this financial support to reduce the economic losses of COVID on a global scale.

But this measure and other pandemic responses—along with declining incomes—have worsened Tunisia’s fiscal deficit and debt situation.

The World Bank pointed out in April that by the end of 2020, government debt will reach 88% of gross domestic product (GDP), compared with 72% the year before. Economic growth is expected to pick up this year, but it will not be enough to restore Tunisia’s economy to its pre-pandemic state.

The country can definitely use the International Monetary Fund’s rescue plan. However, negotiations with international lending institutions on the alleged US$4 billion loan have stalled.

IMF packages usually come with painful conditions to achieve what the agency calls “sustainable” finances. In fact, the agency has pushed Tunisia in the past to cut its public sector wage bills, as well as financial support and general subsidies to state-owned enterprises.

But removing this support will inevitably lead to unemployment and family financial pressure-certainly in the short term.

If things are good and have widespread support among voters, this will be enough for the government to succeed. But the current times are terrible, and the country’s political leadership has been shattered. again.

Credit rating agencies took note of this. Earlier this month, Fitch Ratings downgraded Tunisia to “B-” with a negative outlook on the grounds that it failed to reach a new financing plan with the International Monetary Fund.

In response to the latest political crisis on Monday, Fitch wrote in a press release: “The President of Tunisia’s decision to suspend the parliament and remove the prime minister may further delay the IMF’s plans and thereby ease the country’s huge Financing pressure.”

This has plunged the country into the situation of the past ten years-politically fragile, economically fragile, and lost a strong government that can fulfill the economic promises of the Arab Spring.

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