Factbox: Signs of a Tunisian economy in trouble

Folks stroll previous a restaurant adorned with Tunisian flags and footage of Tunisia’s President Kais Saied, forward of an upcoming referendum on a brand new structure, in Tunis, Tunisia July 15, 2022. REUTERS/Jihed Abidellaoui

TUNIS, July 24 (Reuters) – Public funds are underneath pressure and costs are hovering in Tunisia, presenting large financial challenges to President Kais Saied as he plans to overtake the political system in a constitutional referendum on Monday.

Listed below are a few of the troubles affecting the financial system, which was hit notably exhausting by the COVID-19 pandemic because 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 finances deficit is anticipated to widen to 9.7% of GDP this yr from a beforehand forecast 6.7%, central financial institution Governor Marouan Abassi has stated. This is because of a stronger greenback and sharp rises in grain and power costs – knock-on results of the Ukraine struggle that Abassi has stated have generated an extra $1.6 billion of financing wants.

State funds have 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 power and meals subsidies.

A weaker Tunisian dinar has added to the strain. The forex 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 alternate for freezing public sector wages and recruitment and slicing meals and power subsidies. However the highly effective UGTT labour union opposes the reforms, a major impediment.

DEBT SEEN MORE RISKY

The IMF stated final yr that Tunisia’s public debt would change into unsustainable until reforms have been enacted with broad help.

Tunisia’s excellent public debt will attain almost 114.14 billion dinars ($40 billion) by the top of 2022, accounting for 82.6% of GDP, in accordance with the 2022 state finances, a rise from 81% in 2021.

Reflecting investor concern, spreads on Tunisian public debt – or the premium buyers demand to carry it quite than ultra-safe U.S. authorities bonds – are actually a few of the highest on the planet. learn extra

They’ve risen to over 2,800 foundation factors, virtually 3 times the 1,000 stage that usually units off the warning sirens.

Together with Ukraine and El Salvador, Tunisia is on Morgan Stanley’s high three record of doubtless defaulters.

Some $3 billion value of Tunisian overseas forex debt is ready 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 charge has hit a sequence of file 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 Could, farmers in a number of areas protested on the excessive price of animal feed, and the federal government stated it could increase the costs of some meals together with milk, eggs and poultry.

Tunisia is especially weak to grain provide disruptions attributable to the Ukraine struggle, importing 60% of its gentle wheat and 66% of its barley from Russia and Ukraine, the World Financial institution says.

In June, the World Financial institution authorized a $130 million mortgage for wheat and barley imports.

POVERTY

Hardship is on the rise.

In an interview with an area newspaper in Could, the social affairs minister stated 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 at present. Shut to six million Tunisians, or half the inhabitants, are underneath the poverty line, he added.

Unemployment is excessive, hitting 18.4% in 2021, the World Financial institution says. It’s notably excessive amongst youth, girls and within the west of the nation.

Reporting by Tarek Amara and Marc Jones
Writing by Tom Perry
Modifying by Frances Kerry

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