Tunisia’s political crisis threatens to worsen economic unrest

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TUNIS – Nurse Amira Souissi celebrated the near total seizure of power by Tunisian President Kais Saied in July, promising to fight corruption, contain prices and boost state finances.

But the mother of four is now losing patience with what some Tunisians see as her lack of an economic game plan, as opposition rises against what her opponents are calling a coup.

Souissi said his 1,000 dinar ($ 350) per month salary could no longer keep up with the high cost of living, with 6.2% inflation, and that it was difficult to get a bank loan due to the scarcity of liquidity.

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“We expected the prices to drop. But look, the price of a kilogram of cutlet has gone from 15 dinars to 19 dinars, ”she said at a market in the Ibn Khaldoun district of the capital.

Anger over economic stagnation, made worse by the pandemic, helped spark apparently widespread support for Saied’s intervention on July 25.

But Saied is now under increasing pressure to tackle Tunisia’s economic woes after the political crisis jeopardized the democratic gains Tunisians won in the 2011 revolution that sparked the Arab Spring protests.

Saied’s intervention interrupted very late discussions with the International Monetary Fund for a loan program that should unlock additional economic aid and avoid a crisis in public finances.

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“The situation is very critical in the economy and public finances in particular. We have been on the verge of collapse for months,” said economist Moez Joudi.

“But the current political crisis and the absence of any program and a clear economic vision are really accelerating the complete collapse.”

He predicted that Saied’s focus on politics could turn Tunisia into another Lebanon, which is in the throes of a financial crisis that the World Bank has called one of the deepest depressions in modern history. .

Three quarters of the Lebanese population have plunged into poverty and its local currency has lost 90% of its value over the past two years.

Saied, who sacked the prime minister, froze parliament and gave himself the power to rule by decree, has yet to appoint a new government, define a comprehensive economic policy or say how it would finance the public deficit and payback debt.

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ECONOMIC FAILURES

The president’s office was not available to comment on the state of the economy in the North African country. Neither do economic and financial officials.

Tunisia has paid off more than $ 1 billion in debt this summer using its foreign exchange reserves, but must find about $ 5 billion more to finance a projected budget deficit and more loan repayments.

Saied still enjoys wide support from a public tired of corruption and says he has his hands clean. But political paralysis undermines the chances of economic recovery.

A man who would only give his first name Mohamed was sitting in a cafe with two friends complaining that he had been unemployed for four years.

“The economic conditions are a real test for the president. The situation is bad. The president has opened a door of hope for us, ”he said.

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“I hope he doesn’t close it quickly and that he should avoid populism. We want to see the president attract investment and provide us with jobs. “

The National Institute of Statistics said unemployment was 17.8% and the budget deficit widened to more than 11% in 2020. The economy shrank by 8.2% last year, while that public debt has reached 87% of gross domestic product, according to the IMF.

Both the influential union and the foreign lenders have no choice but to resume the IMF process. While Tunisia needs around four billion dinars per month to pay salaries and repay debts, the public treasury has only 544 million dinars, according to central bank data released on Monday.

Saied said his actions were necessary to tackle political paralysis, economic stagnation and a poor response to the pandemic. He promised to stand up for rights and not to be a dictator.

The president did not set any time limit on his seizure of power, but said he would appoint a committee to help draft amendments to the 2014 constitution and establish “a true democracy in which the people are truly sovereign.” .

Several thousand demonstrators gathered in Tunis on Sunday to protest Saied’s takeover, calling on him to resign in the biggest manifestation of public anger since his intervention. (Written by Michael Georgy, edited by William Maclean)

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In-depth reporting on The Logic’s innovation economy, presented in partnership with the Financial Post.

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