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Analysis – The fate of stalled Tunisia’s IMF loan is in the hands of a reluctant president

Angus McDowall

Tunis, March 9 (Reuters)Tunisia’s bailout negotiations with the International Monetary Fund stalled There is little sign that President Kais Said will agree to reach a deal and take the necessary steps to help the country avoid a financial crisis.

Tunisia reached a staff-level agreement with the Fund in September. $1.9 billion loanbut it misses a major promise, and donors believe the state’s finances are increasingly diverging from the numbers the deal was calculated for.

Without loans, Tunisia faces a full-blown balance of payments crisis. Most of the debt is domestic, but with foreign loan repayments coming due later this year, credit rating agencies say Tunisia could default.

IMF Executive Director Kristalina Georgieva said last month that Tunisia was making good progress and that the Governing Council would consider a deal “soon.” An IMF spokeswoman said the board meeting date will be set once the authorities “meet the program requirements”.

“Things may not be progressing rapidly, but they are progressing steadily,” a Tunisian official said, adding that the government expected progress “probably in the coming weeks.”

Donors remain skeptical.

Tunisia has fallen behind on planned fuel subsidy cuts, has not issued a promised public company law, and powerful trade unions are opposing major reforms the IMF is calling for.

Most importantly, Said has not publicly accepted the deal and has not promised to sign it if approved.

If Tunisia takes too long to finalize an agreement, the Fund may decide that the underlying figures are no longer realistic and negotiations need to be restarted. It’s not clear when that point will come.

Government already struggling to pay for imports of vital goods, repeated shortage Subsidies for sugar, coffee, cooking oil, dairy products and pharmaceuticals in recent months. inflation over 10%.

Without outside help, the shortage could get worse and spread to other commodities such as fuel, and the government could struggle to pay state salaries.

Few foreign donors appear willing to lend to Tunisia without the assurance of an IMF agreement, and domestic financial markets could be tapped soon.

Other sources of funding, such as declining foreign exchange reserves and money printing, would weaken the Tunisian dinar, thereby exacerbating the government’s difficulties with imports and accelerating inflation.

the central bank has already warned I oppose such a move.

Some foreign aid continues, with targeted loans from international financial institutions to support food and fuel purchases, but it is not enough to cover Tunisia’s budget.

abrasive style

Under the September deal, Tunisia intended to raise fuel prices by 3% to 5% a month, donors said. It hasn’t been that way since November and expect another rally soon, but it needs to go much higher to keep up with commitments.

The government said last month it had approved a law on state-owned enterprises seen as a precursor to restructuring efforts to alleviate the huge financial burden they owe to the state, but the law has not been formally issued.

The delay appears to be largely due to President Saeed, who seized most power in 2021, shut down parliament, appointed a new government, and transitioned to rule by decree.

he said that the problem of Tunisia corruption and rejected donors’ pleas to ensure broad social acceptance of the painful reforms through deals with trade unions that now bitterly oppose him.

Far from reconciling donors, his aggressive style, crackdown on dissenters, rhetoric on immigration, and foreign interference provide little reason to give Tunisia the extra leeway.

of world bank has already put on hold further work with Tunisia, and the IMF said on Thursday it was “concerned” about recent developments.

Meanwhile, Said’s extensive rhetoric on aid suggests that if the IMF and donors expect him to publicly back deals that require unpopular spending cuts, they may be out of luck. suggests.

“The solution is not to submit to the new form of colonialism, Dictatz,” he told Prime Minister Naira Boden last month.

He added that if foreign countries want to help Tunisia, they should “return the looted money and give up the accumulated debts.”

(Reporting by Angus McDowall; Additional reporting by Andrea Sharal in Washington; Editing by Hugh Lawson)

((angus.mcdowall@thomsonreuters.com; Reuters message: angus.mcdowall.thomsonreuters.com@reuters.net)))

The views and opinions expressed herein are those of the authors and do not necessarily reflect those of Nasdaq, Inc.

https://www.nasdaq.com/articles/analysis-fate-of-tunisias-stalled-imf-loan-lies-in-hands-of-unwilling-president Analysis – The fate of stalled Tunisia’s IMF loan is in the hands of a reluctant president

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