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Tunisia approves $87m loan to safeguard food supplies

Tunisia President Kais Saied Reuters
Tunisian President Kais Saied rejected an IMF loan in 2022, saying 'foreign diktats that will lead to more poverty are unacceptable'
  • Country accepts TND268m loan from AfDB
  • Funding to go to improving cereal supply chain
  • Project will improve production and reduce storage losses

Tunisia has approved a TND268 million ($87 million) loan from the African Development Bank (AfDB) to safeguard sustainable food production in the country.

The Assembly of People’s Representatives (APR) gave the loan the green light.

It will be used to fund the Cereal Sector Inclusive and Sustainable Support Project (Padific), a body aimed at improving the cereal supply chain.

The loan will be repaid over 24 years, with a four-and-a-half-year grace period.

AfDB will contribute towards 74 percent of the total cost of the project, while the state will cover $30.4 million. The total cost of Padific is $118 million.

The project will allow Tunisia to increase durum wheat production by 1.6 million quintals (1 quintal = 100 kg), barley by 1.2 million quintals, vegetable oil by 18,000 quintals and cattle cake by 42,000 quintals.

It will help the country to reduce post-harvest and storage losses, saving around 115,000 quintals of cereals.

It will also reduce post-harvest losses through the construction of a new silo in Djebel Djelloud and the rehabilitation of two port silos in Rades and Bizerte.

Saudi Arabia earlier this month agreed to provide Tunisia with a $500 million package of financial assistance as the country faces a mounting financial crisis.

The kingdom will provide $400 million as a soft loan and $100 million as a grant.

Tunisia has more than $2 billion of foreign exchange debt repayments due in the fourth quarter of 2023 and the first quarter of 2024.

Finance minister Sihem Boughdiri Nemsia told the APR that Tunisia has so far repaid about 42 percent of all loans due to be settled in 2023. A loan worth TND560 million is due to be repaid on August 4.

Tunisia’s foreign reserves stand at $7.3 billion, covering just over three months of imports, but the reserves have been on a declining trend since early 2021.

Fitch Ratings downgraded Tunisia’s credit rating in June to CCC-, warning of “uncertainty around Tunisia’s ability to mobilise sufficient funding to meet its large financing requirement”.

It warned of “increased signs that a default is probable, for example because of the inability to obtain funding from the International Monetary Fund and unlock associated official creditor financing”.

The country struck a deal with the IMF in late 2022 for a $1.9 billion bailout but later rejected the agreement. 

At the time, President Saied said: “Regarding the IMF, foreign diktats that will lead to more poverty are unacceptable.”

The deal with the IMF would have required Tunisia to eliminate subsidies on food and fuel, make cuts to public services, incorporate sectors of the informal economy into the tax system, reform state-owned enterprises, and devalue its currency, the dinar.

The World Bank has forecast that Tunisia’s economy will grow by around 2.3 percent this year, slightly ahead of the 2.2 percent growth predicted for the wider Mena region.

The Tunisian economy will grow by 3 percent in 2024 and remain at the same level the following year, according to the World Bank’s Global Economic Prospects report.