An economic recipe for riots ignites in Tunisia | Economy and Business News

Lack of opportunities, especially for young people. Punish the debt. A broken social contract. Pandemic pressures make everything much worse.

This economic recipe is fueling social and political unrest around the world this year. South Africa experienced it earlier this month. Cuba too. Now it is the turn of Tunisia.

Each of these countries has its own set of circumstances. But in the context of the Middle East and North Africa, the stakes for Tunisia appear to be very high.

After all, Tunisia is the birthplace of the Arab Spring and has been hailed as its only success story: a nation that abandoned its long-time authoritarian president and emerged like Phoenix from the flames of reform-minded protests. democratic, the rule. of the law, and an economy that serves the people and not just the corrupt elites.

But the phoenix never rose. Political stagnation and economic weakness have a symbiotic relationship. They feast, and in Tunisia, both have grown stronger in the process.

More than a dozen governments have ruled the country since the Arab Spring, while the economy has languished.

Average annual economic growth between 2011 and 2019 was a disappointing 1.5 percent, according to the World Bank. Investments and exports never regained their pre-Arab Spring strength. Corruption, however, remained rampant.

Then the pandemic hit.

Tunisia’s economy contracted 8.6 percent last year and another 3 percent in the first three months of this year on an annualized basis, according to government data.

Tourism, one of the foundations of the economy that generates foreign exchange, was decimated in 2020. Manufacturing, another pillar, was also severely affected.

Tunisian security agents hold protesters in front of the parliament building in the capital Tunis on July 26, 2021, following a move by the president to suspend the country’s parliament and remove the prime minister. [File: Fethi Belaid/AFP]

Those interruptions to the pandemic pushed the official unemployment rate to 17.4 percent at the end of last year, compared with a pre-pandemic level of 14.9 percent. In the first three months of this year, it had risen to 17.8 percent according to the National Institute of Statistics.

But that number doesn’t capture the full extent of the despair and frustration plaguing the nation’s youth.

Youth unemployment was above 42 percent in 2011, according to the World Bank. By 2019, it had dropped to about 35 percent, but the International Monetary Fund estimates that it rose again above 36 percent in the final quarter of last year.

It was the youth of Tunisia who sowed and nurtured the Arab Spring. This year, a new generation has taken to the streets to protest against political inefficiency, corruption and the chronic lack of opportunity.

Meanwhile, the country is now on the cusp of its third and most severe wave of COVID-19 infections that saw its healthcare system collapse this month and more lockdowns were imposed.

In a striking example of global vaccine inequality, only about 7 percent of Tunisians are fully vaccinated, according to the latest figures from Our World in Data.

The government has tried to lessen the financial hit of job and income loss due to COVID restrictions by expanding existing cash transfer programs to distressed households. That kind of fiscal support has been advocated by the IMF and World Bank to mitigate the economic damage of COVID around the world.

But that and other measures to respond to the pandemic, along with declining revenues, have worsened Tunisia’s fiscal deficit and debt situation.

Government debt reached 88 percent of gross domestic product (GDP) at the end of 2020, compared with 72 percent the previous year, the World Bank noted in April. Economic growth was expected to pick up this year, but not enough to return Tunisia’s economy to its pre-pandemic level.

The country could definitely use an IMF bailout. But negotiations have stalled with the international loan agency for a $ 4 billion loan.

IMF packages are often accompanied by painful conditions to achieve what the agency calls “sustainable” finance. And indeed, the agency in the past has pushed Tunisia to cut the public sector wage bill, as well as fiscal support for state-owned companies and general subsidies.

But withdrawing that support would inevitably lead to job losses and financial pressure on households, certainly in the short term.

That would be difficult enough for the government to do so if times were good and enjoyed widespread support among the electorate. But times are dire right now, and the nation’s political leadership is fractured. Again.

Credit rating agencies are taking notice. Earlier this month, Fitch Ratings downgraded Tunisia to a ‘B-‘ with a negative outlook, citing the lack of agreement on a new financing program with the IMF.

On Monday, Fitch responded to the latest political crisis, writing in a press release: “The Tunisian president’s decision to suspend parliament and remove the prime minister may add further delays to an IMF program that would ease the country’s heavy financial pressures. “.

That leaves the country where it has been for a decade: politically fragile, economically fragile, and devoid of a strong government that can deliver on the economic promises of the Arab Spring.

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