A senior government official announced today, Tuesday, that Tunisia is preparing an alternative proposal to submit to the International Monetary Fund (IMF) after President Kais Saied rejected the IMF's "impositions" regarding a $1.9 billion loan that was negotiated last year. Negotiations for a financial rescue plan have stalled since October when Tunisia and the IMF reached a technical agreement, with Saied later expressing his firm opposition to the idea of reducing subsidies, stating that it could cause major social tensions and harm civil peace in the country. He made it clear that he also opposes the sale of state-owned enterprises.
The official told Reuters that President Saied believes that reducing subsidies for food and fuel will harm marginalized and poor groups, worsening their suffering. The new proposal will not include similar measures. The source did not provide a timeline for submitting the proposal or for potential negotiations with the IMF. The agreement reached in October took months of detailed technical negotiations.
It remains unclear how far Tunisia can avoid financial collapse and manage its ability to meet external debt obligations. Concerned donors have pledged to inject additional significant funds if the government can reach an agreement with the IMF. The European Union announced on Sunday that it would provide €900 million in conditional loans. U.S. Secretary of State Antony Blinken urged Tunisia on Monday to present a revised plan to the IMF.
Gulf countries are also expected to provide financial support if an agreement with the IMF is reached. The experts' agreement between Tunisia and the IMF also includes restructuring state-owned enterprises, which the IMF stated had total debts representing 40 percent of GDP in 2021. It is not yet known whether Tunisia intends to modify that portion of its proposal related to public enterprises.
President Saied mentioned that other ideas could be considered, including taxing the wealthy to fund a support fund, which could serve as a compensatory measure for lifting subsidies on food and fuel. However, it remains unclear whether this would generate enough funds to significantly fill the financing gap.
