Tunisia's talks for a rescue package from the International Monetary Fund (IMF) have been stalled for months, with little sign that President Kais Saied is eager to approve the necessary steps to reach an agreement and help the country avoid a financial crisis. Tunisia reached a staff-level agreement with the IMF in September for a loan of $1.9 billion, but it has failed to meet key commitments, and donors believe that the state’s finances are increasingly diverging from the figures upon which the agreement was based.
Without the loan, Tunisia will face a comprehensive balance of payments crisis. While most of the debt is domestic, there are external debt payments due later this year, and credit rating agencies have indicated that Tunisia may default. IMF Managing Director Kristalina Georgieva noted last month that Tunisia has made good progress and that the Fund's Board will consider the agreement "very soon." An IMF spokesperson indicated that the timing for the Board's consideration will be determined once "the authorities complete the program requirements."
A Tunisian official stated, "Things may not be moving quickly, but they are moving steadily," adding that the government expects to make progress "perhaps in a few weeks." Tunisia has not implemented planned cuts to fuel subsidies and has yet to issue the state-owned enterprises law it previously promised. The powerful Tunisian General Labour Union opposes the major reforms sought by the IMF.
Most importantly, Saied has not publicly supported the agreement and has not committed to signing it once passed, raising concerns among donors that he may reject the loan or cancel the reforms after receiving funds or hold them responsible for any painful economic repercussions that follow.
If Tunisia takes longer than acceptable to finalize the agreement, the IMF may find the figures it is relying on no longer realistic, necessitating a renegotiation. It is unclear when things will reach this point. The government is already struggling to cover the cost of imports for essential goods and has experienced recurring shortages in subsidized items such as sugar, coffee, cooking oil, dairy products, and medicines. The inflation rate has exceeded ten percent.
Without external assistance, shortages may worsen and spread to other goods such as fuel, and the government may face difficulties in paying state employees' salaries. None of the foreign donors appear ready to lend to Tunisia without the reassurance of an agreement with the IMF, and funds could soon run out in the local financial market. Alternative financing sources, such as drawing from foreign currency reserves or printing money, would undermine the Tunisian dinar, exacerbating the government's difficulties with imports and accelerating inflation. The central bank has already warned against such moves.
