Tunisia yet to propose new terms for $1.9bn IMF loan

Reuters/Jamal Saidi

Tunisia has not yet proposed new terms for a long-pending $1.9 billion International Monetary Fund (IMF) loan, according to the fund’s Middle East and Central Asia director Jihad Azour.

Speaking at IMF-World Bank annual meetings in Morocco this week, Azour called for the elimination of “wasteful and socially unfair subsidies” before the fund’s board could approve a preliminary staff-level agreement for Tunisia.

Fuel subsidies benefited mainly wealthy Tunisians, Reuters quoted him as saying, adding they were a “fiscal waste” during high oil prices.

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A new IMF mission plans to visit Tunisia to assess the recent economic developments, the official said, without giving any details on timing.  

Earlier this month, Tunisia’s economic growth forecast was downgraded further by the World Bank amid concerns over the drought-hit agricultural sector, as well as uncertainties over debt financing and the weak momentum of structural reforms.

In its report, Balancing act: Jobs and wages in the Middle East and North Africa when crises hit, the World Bank noted that the Tunisian economy appears to be slowing “significantly” compared with trends in 2021 and 2022.

As a result, its growth forecast for the North African country has dropped to 1.2 percent for 2023, down from a preliminary estimate of 2.3 percent in June. The World Bank cites “very uncertain prospects”.

Bailout talks with the IMF have stalled since last October, when a preliminary agreement for a 48-month loan worth close to $2 billion was reached.

Tunisian president Kais Saied’s government refused to accept the terms of the proposed deal, which fuelled speculation over an imminent default on the country’s debt.

The budget deficit is expected to narrow to 5.6 percent of GDP this year, down from 6.6 percent last year, according to the World Bank, as a result of the reduction in energy subsidies, lower real wages and an increase in tax revenues.

However, the bank predicts that gross financing needs will increase further to 16 percent of GDP in 2023, from 12.6 percent in 2022, “due to significant external debt repayments”.

Tunisia has borrowed roughly TND1.15 billion ($360 million) in foreign currency from local banks since the beginning of 2023 under two syndicated loans.

The amount is twice the value of the foreign currency bank loan forecast in the state budget report for 2023, which is estimated at TND528 million.

The government has set itself the target of raising TND24.3 billion in 2023 from various domestic borrowing sources, such as treasury bills, the national bond issue and the syndicated loan in foreign currencies.

Earlier this month the Finance Ministry announced that 18 local banks had granted the state a second syndicated loan of TND750 million in foreign currency, while the first loan, signed back in May, was financed by 12 local banking institutions for more than TND400 million in foreign currency.

As of September 10, the amount of debt repaid was TND6.6 billion, compared with TND8.9 billion forecast for the year in the 2023 budget, as reported by Agence Tunis Afrique Presse.