Economy

Tunisia approves $54m loan from Italy

July 24, 2024, 10:54 AM

A Tunisian farmer works on his prickly pear plantation. Tunisia has secured loans to help with food security and its national budget

Italian loan to help Tunisia’s budget
40-year repayment period
$4bn external loans due this year

Tunisia has officially approved a €50 million ($54 million) loan from Italy to support its state budget for the current financial year.

The loan was originally signed in April. It will be repaid over 40 years with a 31-year grace period and a zero percent interest rate.

Tunisia’s current account deficit narrowed to 2.3 percent of GDP in 2023, around $3 billion, from 8.5 percent the previous year.

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GDP growth is forecast at 2.1 percent this year, rising to 2.9 percent in 2025, according to a report from the African Fund for Development.

“Tunisia is currently benefiting from economic tailwinds, the growth remains subdued and unemployment is high,” Julie Kozak, director of the communications department at the International Monetary Fund, said in April.

“In Tunisia, favourable terms of trade and tourism, together with the three-year wage agreement, has helped reduce external and fiscal deficits in 2023. And these factors are likely to persist in the near term.”

The North African country has almost $4 billion in external debts due for repayment this year.

In March 2024 the European Union handed Tunisia a €150 million ($163 million) grant to support economic reforms and fiscal stability. The World Bank has also approved loans worth $520 million to address Tunisia’s food security challenges.

Italian prime minister Giorgia Meloni has previously taken on the role of intermediary in the long-running feud between Tunis and the IMF to unblock $2 billion worth of funding originally approved in October 2022.

A major issue for nearby Italy and the EU as a whole has been the number of migrants travelling through Tunisia, a large proportion from sub-Saharan Africa, and crossing the Mediterranean before landing on the European mainland.

In July the European Council, whose members include the heads of state of the bloc’s 27 countries, signed a memorandum of understanding with Tunisia that spanned issues including migration, according to an official document obtained and published by Statewatch.

From 2021-23, the EU gave Tunisia €175 million, a spokesperson told AGBI, explaining this was to fund the “protection of vulnerable refugees and migrants, return and reintegration, border management and anti-smuggling”.