Tunisia Struggles to Secure IMF Loan Amid Lack of Reforms
Tunisia’s Delayed IMF Loan
Tunisia reached a preliminary deal with the International Monetary Fund (IMF) a year ago for a $1.9 billion loan program. However, despite the passage of 12 months, the country has yet to receive any funds and appears resistant to implementing the necessary reforms. This delay has raised concerns about Tunisia’s long-term outlook, even though analysts believe it can manage without IMF support in the short-term.
Political Challenges and Record Delay
Tunisian President Kais Saied’s rejection of some of the IMF’s terms, coupled with domestic political turmoil, has hindered the approval of the deal by the IMF board. The one-year lag between the preliminary agreement and final signoff is a record delay compared to other cases, highlighting the lack of political will to address the necessary reforms. James Swanston, a senior economist at Capital Economics, emphasized the importance of Tunisia’s government taking action on reducing the budget deficit, reforming state-owned enterprises, and devaluing the currency to secure the loan.
Short-Term Resilience
Despite the challenges, Tunisia’s economy may withstand the absence of an IMF program in the short-term. The country’s increased reserves and marginal fiscal consolidation, along with a boost in tourism, have provided some additional breathing room. Moreover, Tunisia received fresh funding from Saudi Arabia and has a conditional pledge of support from the European Union. However, the IMF program remains crucial for Tunisia’s long-term financial stability.
Debt Concerns and Geopolitical Support
While Tunisia can cover its upcoming bond maturities with its reserves, there are concerns about its capacity for repayment in the medium-term. Bond prices indicate worries over the country’s ability to meet future obligations. Nevertheless, Tunisia can count on support from other nations due to its geopolitical and geographic importance. Italian Prime Minister Giorgia Meloni, in particular, has been a staunch supporter of Tunisia, which has helped create more space for negotiations.
The Importance of IMF Approval
Fitch, a credit agency, assumes that the IMF program will be approved soon. International investors, however, remain skeptical about Tunisia’s ability to avoid default without the IMF loan. Delivering on the necessary reforms outlined by the IMF is crucial for Tunisia’s financing situation and long-term stability.
Disclaimer: This article is for informational purposes only. The information provided does not constitute investment advice, financial advice, or any other type of advice.
