Bread, Debt and Politics Whip Up Volatile Mix in Tunisia
Bread, Debt and Politics Whip Up Volatile Mix in Tunisia
(Bloomberg) -- Across North Africa, bakeries are providers of subsidized daily sustenance and a barometer of the public mood.
So when Tunisian President Kais Saied sought to counter reports that food staples like flour had become scarce as Russia’s war on Ukraine deepened his country’s economic crisis, a seemingly well-stocked Tunis bread maker, where he used to shop, made for a useful backdrop.
Or so he thought. As the bakery’s owner last month gently insisted shortages were real, an unsmiling Saied dressed in a somber black coat was instead forced to attack profiteers “starving the people” by driving up prices. After accusing political opponents of fomenting the shortfalls, the former law professor left with four loaves and an earful of criticism from bystanders.
The war in Ukraine is accelerating Tunisia’s slump as energy and commodity prices spike and supplies of essentials tighten globally. Inflation hovers near a record high and the deficit is set to double, while 40% of under-25s are unemployed, threatening a new exodus of migrants across the Mediterranean to Europe. Crucially, talks with the International Monetary Fund on a rescue package are flatlining.
Two weeks after the visit, Saied disbanded parliament after lawmakers convened virtually in defiance of his July 2021 order suspending the assembly, an act that was dubbed a coup by rivals including the influential Islamist Ennahda party.
Almost a year after he derailed a fragile democracy dating to the first salvo of the Arab Spring and seized executive power, Saied appears stuck. Critics say he’s unwilling or unable to rebuild the political consensus needed to drag the economy out of the morass.
Patience is running out.
“We just want to live,” said Bahaa, 28, a clothing seller in the capital’s turbulent district of Ettadhamoun. He only gave his first name in a country where a crackdown on dissent has grown. “If the situation continues, young people will go to the presidential palace with stones to throw.”
In January police had used tear gas and water cannon to disperse hundreds of protesters in the capital marching to mark the country’s Arab Spring uprising and demanding Saied reverse his power grab. Since then, economic conditions have further worsened. Taxi drivers have protested against the increase in fuel prices, public sector workers have seen delays in the payment of their salaries and queues for bread have grown as supply is squeezed.
Saied, 64, has resisted tackling the problem. He’s shunned potential allies within the powerful UGTT trade union and minority parties. He’s instead pressing ahead with his “decentralizing” agenda, which seeks to sideline the bickering political groups he blames for ruining Tunisia since its 2011 revolution and putting power in the hands of local committees.
Multiple attempts to discuss the issues raised in the article with officials at the presidency, the government and the central bank, were unsuccessful. Officials at UGTT declined to comment.
Investors aren’t happy, either. They’ve punished Tunisian bonds, worried that a surge in food and energy costs, and the loss of Russian tourists, may speed the cash-strapped sovereign issuer toward a default. Tunisia’s economy now is less than 90% its size before the uprising over a decade ago, while the ratio of government debt to gross domestic product has almost doubled to around 88%, with the IMF projecting it will reach 99.7% in 2025.
The highest commodity prices in decades are eating into foreign-currency reserves, which are now sufficient to cover four months of imports. They’re low enough to cause some jitters among investors over the sustainability of Tunisia’s foreign debt pile.
IMF Talks Delayed
At home, the mood is so grim there “are no guarantees that Tunisians will accept reforms that a new program with the IMF will entail,” said Youssef Cherif of the Columbia Global Centers research initiative. “The fact that there are talks in itself is a sign Saied wants a new program,” he said. “But should the reforms be rejected, he will blame his government.”
Soaring import costs mean the budget deficit may almost double to 20 billion dinars ($6.6 billion) this year, outstripping the $4 billion authorities say they would seek from the IMF. A deal of that size already looks ambitious given Tunisia’s withdrawal quota with the lender, indicating the government may seek assistance under the IMF’s exceptional access framework, likely bringing even tougher conditions.
A Western diplomat with knowledge of discussions between Tunisian officials and the G-7 nations said Saied appeared to believe he could fix the country single-handedly, describing him as lacking trust in others. The diplomat acknowledged officials were working “flat out” toward a new IMF program, but said there was reticence to tackle painful issues such as indebted and bloated state-owned enterprises that are a stronghold of the UGTT.
“The UGTT will be instrumental in how things go for Saied,” said Hichem El-Ajbouni, one of the lawmakers seeking to restore parliamentary powers. Reforming state companies “is necessary but difficult.”
According to a person familiar with the process, the economic damage wrought by the war has delayed technical talks with the IMF by about a month as Tunisian officials seek to finalize the measures they will pledge to undertake.
But authorities, which had set a target date of April for a deal, are also yet to provide assurances they can win a broad domestic consensus for the needed reforms, said the person, who asked not to be named.
The person saw no risk of a default as most of Tunisia’s debt is medium- to long-term but acknowledged success was not guaranteed. If negotiations approach the parliamentary election that Saied plans to hold in December -- if he can pass a new constitution beforehand -- there will be further delays.
That’s likely to test the loyalty of Tunisians like Monjia Moqni, owner of the capital’s Royal Poultry food store, who backed Saied’s takeover last year.
As she hung up a poster of the president promising shoppers lower prices she reflected that “business hasn’t been great,” especially after prices rose further due to the war. “This is the most difficult Ramadan for Tunisians.”
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