Tunisia’s economic prospects remain grim, as it is projected to have the lowest growth in the southern Mediterranean at 1.8% in 2025. The country faces a high inflation rate of 16% and a fiscal deficit of 6.3% of GDP. Rejecting an IMF deal, the government is opting for domestic loans, while President Kais Saied seeks to extend control over the central bank.
The Tunisian economy is facing significant challenges, particularly following President Kais Saied’s consolidation of power. The European Bank for Reconstruction and Development (EBRD) predicts that Tunisia will experience the lowest growth rates among its southern Mediterranean counterparts, projecting a mere 1.8% growth in 2025 and 2.2% in 2026. This is starkly below regional expectations of 3.7% growth in 2024 and an increase to 4.1% by 2026.
Macroeconomic indicators paint a bleak picture for Tunisia, with inflation rising to 16% in the latter half of 2024. Additionally, the nation is projected to incur a fiscal deficit of 6.3% of GDP this year, while public payroll expenses account for a substantial 13.3% of GDP. These factors contribute to the economic instability faced by the country.
In a significant policy decision, Tunisia has declined a $1.9 billion deal from the International Monetary Fund (IMF) that demanded reforms in subsidies and civil services. Instead, the government has resorted to domestic loans amidst a surge in foreign debt, which currently stands at 82.2% of GDP. This decision reflects an effort to manage the fiscal crisis while avoiding IMF-imposed austerity measures.
To further consolidate his control, President Saied has sought to extend his influence over the central bank, urging legislative changes that would allow it to lend directly to the treasury. This strategy resembles Algeria’s controversial money-printing policies, which have historically led to currency depreciation. As of now, Tunisia’s foreign exchange reserves are stable at 25 billion dinars ($7.6 billion), providing a buffer to cover 3.5 months’ worth of imports.
In summary, Tunisia’s economic outlook is concerning, with projections indicating the lowest growth in the southern Mediterranean region amid high inflation and a substantial fiscal deficit. The Tunisian government’s rejection of the IMF deal and the decision to manipulate central banking policies could further exacerbate economic instability. Unless significant reforms are adopted, the country’s fiscal health and growth prospects are likely to deteriorate further.
Original Source: northafricapost.com
