Will the IMF deal break or make Tunisia’s leadership?

Tunisia’s leaders trumpeted the news of a recent staff-level agreement with the International Monetary Fund (IMF) on a $1.9 billion rescue package aimed at addressing the country’s deepening financial crisis. After more than a year of protracted talks, the deal — which still needs to go through an IMF executive board vote in December — is being presented by Tunisian President Kais Said as a vindication of his leadership. However, the absence of consensus around the reforms underpinning the agreement ultimately could torpedo the agreement and, potentially, Said’s presidency.

The deal in itself is unlikely to be the panacea to Tunisia’s many economic problems, namely the declining standard of living, food and fuel shortages, and skyrocketing inflation, all of which have been exacerbated by COVID, Russia’s war with Ukraine, and Tunisia’s own political volatility. Tunisia already owes the IMF $2.1 billion; its debt burden is currently at $40 billion and its debt-to-GDP has risen from 68.97 percent pre-pandemic to 87.9 percent this year. If it continues at this pace, debt-to-GDP could hit 100 percent by 2025.

The government hopes that the new IMF deal will unlock bilateral loan agreements that will jumpstart economic recovery and lead to growth, though this will all depend on whether Tunisian leaders can convince international partners to come to the country’s aid. What is less certain is the ability of these leaders to deliver the reform package embedded in the deal, including more sustainable job creation, greater tax equity, and cutting rampant public spending and price subsidies. Despite the integration of measures to expand social safety to disadvantaged and marginalized populations, fear that these actions will aggravate unemployment and inflation at a time of intense economic misery predominate. And even with all the will in the world, the deep and entrenched government bureaucracy that is riddled by administrative corruption may be unable to deliver on this ambitious agenda.

The erosion of Tunisia’s democratic institutions under President Said also threatens to derail the deal. In July, Said followed up his ousting of parliament by proposing a new constitution that formalized the transformation of the country from a parliamentary to a hyper-presidential system with limited checks and balances. Now, with a redrafted electoral law that bans candidates from running on party lists, parliamentary elections are scheduled for Dec. 17, and Kais Said is one step away from reaching his goal. 

In the U.S., continued concerns about Tunisia’s democratic trajectory and democratic backsliding were most recently reflected in a bipartisan Senate Foreign Relations Committee statement by Sens. Bob Menendez (D-N.J.) and Jim Risch (R-Idaho) urging the Biden administration to condition assistance to the restoration of Tunisian democracy.

Only one political actor could derail Said’s economic and political agenda. Tunisia’s powerful UGTT trade union, whose extensive membership is at the front line of any job and subsidy cuts, slammed the government for pledging to relinquish control of some state-run companies. The state’s budget is consumed by public sector spending, the public sector hiring having been treated as a way to manage discontent in spite of the untenable cost. But without the support of the unions, opening public companies to private sector participation, not to mention privatization, could trigger widespread unrest, as with the introduction of similarly contentious reforms. And because the stakes are high, any destabilizing measures would be risky for a government that has bestowed all power in the hands of the president.

Recent union-led strikes across the country in response to IMF negotiations represent the first test for Said who has, to date, faced muted opposition to his political project. Proceeding without the UGTT and the absence of consensus around the IMF reforms especially could undermine the country’s economic future and threaten Said’s agenda, or perhaps even his political survival.

Ironically, in his determination to centralize power and destroy Tunisia’s young democracy, Said may doom this desperately needed bailout and become the agent of his own downfall. And if he succeeds, the Tunisian president almost certainly will claim it as proof of his reformist bona fides and continue to consolidate his power at the expense of the country’s embattled democratic institutions. The difficult task of navigating this lose-lose scenario falls to the stakeholders seeking to preserve Tunisia’s hard-won democracy. 

Patricia Karam is the regional director for the Middle East and North Africa at the International Republican Institute. Follow her on Twitter @PatriciaJKaram.