Sunday, November 28

The Tunisian president calls for austerity… Will it reduce the economic crisis in the country?

Tunisia is experiencing the worst economic and financial crisis in decades, deepened by the Corona pandemic

Tunisia President Kais Saied’s call for Tunisians to contribute to mobilizing the state’s financial resources and his repeated talk about the need for austerity represented an explicit acknowledgment of the severity of the economic and financial crisis the country is going through, according to economists, amid questions about the options available to Najla Boden’s government to bridge the budget deficit.

Saeed confirmed – during his supervision of the work of a ministerial council a few days ago – that the funds that will be collected will be under the direct supervision of the Presidency of the Republic and the Presidency of the Government, “so that no penny is spent except for what was monitored for it,” according to a presidential statement.

High rates of inflation and poverty

Tunisia is experiencing the worst economic and financial crisis in decades, deepened by the Corona pandemic, as the inflation rate reached 6.3% last October, while the unemployment rate reached 17.9%, according to figures issued by the National Institute of Statistics.

Tunisia’s foreign exchange reserves decreased by 9.5%, to 20.9 billion dinars ($7.4 billion) in September, compared to 23 billion dinars ($8.16 billion) during the same period in 2020.

A statement from the Board of Directors of the Central Bank of Tunisia had previously preoccupied economists and politicians after expressing his concern about the severe scarcity of the state’s external financial resources, in return for important needs to complete the financing of the state budget for the year 2021.

The Central Bank justified the lack of liquidity by fearing international lenders in light of the deterioration of Tunisia’s sovereign numbering and the absence of a new program with the International Monetary Fund.

And the poverty rate in the country after the Corona pandemic recorded an increase from 16.7 to 20.2%, and a report issued by the World Bank expected an increase in the number of poor people who are on the verge of falling into poverty from 16.7 to 20.1% of the total population of the country.

The middle class has seen a decline after it represented 70% of Tunisian society in 2011, and now does not exceed 50% in 2020.

The World Bank forecast that public debt will rise from 72 percent of GDP in 2019 to 87 percent in 2020, well above the benchmark for emerging market debt burdens of 70 percent of GDP.

direct financing

For his part, economics professor Reda Al-Shakandali sees in his speech to Al-Jazeera Net that President Qais Saeed’s invitation to Tunisians to contribute to financing the state’s resources and self-reliance is an explicit acknowledgment of the impossibility of going to borrow from international financial institutions and even from the countries to which the Prime Minister went, such as Saudi Arabia and the UAE.

And the Director General of Finance and External Payments at the Central Bank of Tunisia previously revealed in press statements that there are “very advanced” negotiations with Saudi Arabia and the UAE to finance the state’s resources, which suffer from severe shortages.

The Saudi Ministry of Finance announced a few days ago that the Kingdom deposited 3 billion dollars with the Central Bank of Egypt, and also extended previous deposits worth 2.3 billion dollars, in addition to depositing the same amount in the Central Bank of Pakistan, while providing 1.2 billion dollars to support the balance of payments.

Shakandali considered that Tunisian banks have exhausted their ability to finance the state budget, so that the only solution remains to resort to direct financing by the Central Bank, despite its disastrous repercussions on the rate of inflation, the rise in prices and the purchasing power of Tunisians, according to his estimation.

He stressed that the Tunisian President’s call to donate their money poses more than one problem in relation to their difficult financial situation as individuals, in addition to the impossibility of going to small and medium-sized enterprises, most of which complain of bankruptcy as a result of the impact of the Corona pandemic.

A statement issued by the Central Bank last Saturday indicated that the Tunisian government resumed its “technical talks” with a delegation from the International Monetary Fund headed by its Director for the Middle East and Central Asia Jihad Azour.

The Tunisian Central Bank pointed out that this meeting, which came at the request of the Tunisian Prime Minister, comes within the framework of “the continuation of technical discussions between the staff of the International Monetary Fund and the Tunisian authorities” and a review of economic and monetary developments in Tunisia, as well as the economic reforms envisaged by the Tunisian authorities.

Tunisian banks have exhausted their ability to finance the state budget, leaving the only solution to be resorting to direct financing by the Central Bank (Reuters)

Reliance on own resources

Speaking to Al Jazeera Net, financial expert Abdel Jalil Badawi praised President Qais Saeed’s call for Tunisians to rely on self-abilities in order to save the country’s economic situation, pointing out that his call was directed mainly to those he described as “the new rich” who had accumulated wealth and evaded paying taxes in recent years.

He added, “It is time for the state to recover its money owed from citizens, to approve a tax on wealth and put an end to fiscal evasion, which averaged 12.6 billion dinars.”

Regarding the Tunisian President’s call for austerity, the speaker indicated that the concept of austerity relates to several areas, including reducing public expenditures for state institutions and stopping the benefits in kind granted to employees.

The economist called for the need to reconsider the supply agreements that damaged the trade balance, similar to the trade agreement with Turkey and China, in light of the decline in Tunisia’s reserves of hard currency savings, which became within 130 supply days after exceeding 160 days in late 2020.

He pointed out that the Boden government’s options are limited, and it is necessary to rely on self-reliance and take measures that enhance the sovereignty of its national decision in light of the bleeding of loans and gifts.

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Reference-www.aljazeera.net

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