News / Africa

Tunisia Protests to Test Subsidy Reforms

Street vendors demonstrate against the government, Tunis, March 13, 2013.
Street vendors demonstrate against the government, Tunis, March 13, 2013.
TEXT SIZE - +
Reuters
— Protests and strikes planned in Tunisia over the next few weeks will test the government's ability to repair its shaky finances — and may affect its efforts to secure a $1.78 billion loan from the International Monetary Fund.
 
In contrast to neighboring Egypt, where political unrest has put most economic reforms on hold, Tunisia is pressing ahead with tax rises and cuts to expensive government subsidies that are straining the state budget.
 
Last week authorities raised most fuel prices for the second time in six months, lifting petrol prices at the pump by 6.8 percent. Taxes on alcohol increased this month, and several weeks ago the state-controlled milk price rose.
 
Also this month, the government imposed a levy of 1 percent on salaries above 1,700 dinars ($1,075) per month to help fund remaining subsidies on fuel and food.
 
The steps have met a storm of public criticism. The Tunisian Organization for Consumer Protection, a consumer advocacy group, has called for demonstrations this Friday against the fuel price hike and inflation in general, which could draw thousands of people.
 
Taxi drivers plan a one-day strike on March 18 — their first such mass action in years — which may involve thousands of drivers. Gasoline station owners have called for a three-day strike in April, saying higher fuel prices will encourage the sale of gasoline smuggled from Libya.
 
"After the spread of poverty and unemployment, now the middle class is suffering. We can't support deducting 1 percent of salaries, or the crazy rise of food prices and now fuels," said Salem Ben Naceur, a 35-year-old teacher in Tunis.
 
"We will tell them that the people are very angry and to pay attention to our reaction."
 
Political turmoil
 
The government's determination to go ahead with its economic reforms is striking because it follows some of the worst unrest in Tunisia since the uprising that overthrew president Zine al-Abidine Ben Ali two years ago.
 
The assassination of secular politician Chokri Belaid on Feb. 6 led to three days of sometimes violent street protests and the resignation of Prime Minister Hamadi Jebali. The new prime minister, Ali Larayedh, last week unveiled a coalition cabinet led by the moderate Islamist Ennahda party, saying it would serve only until elections later this year.
 
With such a limited mandate, the government might be expected to back down on the economic reforms, at least partially. But so far it appears determined to see them through, perhaps because it calculates the economic costs of abandoning them would be prohibitive.
 
Late last year the government projected a large budget deficit of 6 percent of gross domestic product in 2013, and the outcome could be worse because of the economic costs of the recent unrest.
 
At the end of last month Moody's Investors Service cut Tunisia's credit rating to junk territory, joining the other two major rating agencies, and the cost of insuring Tunisian debt against a default jumped to a four-year high — exceeding levels seen during the turmoil of the 2011 revolution.
 
The money which the government is saving through its recent steps may go a considerable way to reassuring debt markets that Tunisia can cut its deficit. Finance Minister Elyess Fakhfakh said the fuel price rise would reduce the cost of subsidies in the 2013 budget by 500 million dinars, to 4.2 billion dinars. The price hike for alcohol would bring in nearly 200 million dinars.
 
Economy Minister Ridha Saidi, speaking last week after the appointment of the new cabinet, said the government would take further measures to reduce the budget deficit, such as trying to cut ministries' fuel consumption by 30 percent. But he insisted the fuel price hike would stay.
 
Tunisia's subsidy reform program is needed partly because, at present, subsidies often end up benefiting wealthier people rather than poorer ones, he argued.
 
IMF loan
 
One problem with such arguments is that they come at a time when consumers are frustrated by high inflation. Depreciation of the Tunisian dinar last year helped to boost annual inflation to a 57-month high of 6.0 percent in January 2013, according to official data; the rate fell back only slightly to 5.8 percent in February. Economists say actual inflation, as experienced by many ordinary people, is around 10 percent.
 
Another problem is that the economic reforms have become embroiled with the specter of foreign involvement in Tunisia's affairs. Many Tunisians believe the government hiked fuel prices on the advice of the IMF, as part of an understanding under which the country would receive its $1.78 billion loan.
 
The IMF said in early February that talks were at "an advanced stage" on Tunisia obtaining the precautionary stand-by loan. The money would come in handy; the central bank's foreign reserves fell to 11.38 billion dinars, or the equivalent of 107 days of imports, in late February from 12.58 billion dinars or 119 days at the end of 2012.
 
Saidi insisted that the fuel price hike was not in response to pressure from the IMF: "The increase in fuel was originally programmed in the 2013 budget and was an independent decision, not imposed by any party including the International Monetary Fund."
 
The IMF has not revealed details of its talks with Tunisia.
 
However, it has made no secret of its desire for North African countries in general to strengthen their state finances with subsidy reforms, and many Tunisians see its hand in government policy.
 
"All prices have risen and high fuel prices will have a serious impact on the economy, on the poor and on middle class consumers," Lotfi Khaldi, head of the Tunisian consumer advocacy group, told a news conference last week.
 
"The decision is a response to conditions of the International Monetary Fund."
 
Concern about the public reaction to a deal with the IMF could conceivably cause the government to delay signing an agreement, as has happened in Egypt.
 
Moez Joudi, a private economist who divides his time between Tunis and Paris, said Tunisia needed an IMF deal because it would have trouble borrowing from the markets after downgrades of its credit rating.
 
But he said the government should avoid imprudent steps that would hurt the middle class, who were needed to revitalize the economy. It should look at steps such as cracking down on smuggling and tax evasion, creating a more equitable tax system and making public spending more efficient, he argued.

You May Like

Abuja Blast Impacts Lives, Livelihoods

Officials say they are looking at ways to help bombing victims and boosting security More

Cambodia Technology Adviser Criticizes Cybercrime Draft Law

Phu Leewood says current criminal code can be used to prosecute offenders and that there is no need for a separate law More

Photogallery A Year Later, Boston Remembers Deadly Marathon Bombings

City pauses to honor victims and salute emergency workers who came to their assistance in frantic moments after blasts More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Google Buys Drone Companyi
|| 0:00:00
...
 
🔇
X
George Putic
April 15, 2014
In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
Video

Video Google Buys Drone Company

In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
Video

Video Ray Bonneville Sings the Blues and More on New CD

Singer/songwriter Ray Bonneville has released a new CD called “Easy Gone” with music that reflects his musical and personal journey from French-speaking Canada to his current home in Austin,Texas. The eclectic artist’s fan base extends from Texas to various parts of North America and Europe. VOA’s Greg Flakus reports from Austin.
Video

Video Millions Labor in Pakistan's Informal Economy

The World Bank says that in Pakistan, roughly 70 percent work in the so-called informal sector, a part of the economy that is unregulated and untaxed. VOA's Sharon Behn reports from Islamabad on how the informal sector impact's the Pakistani economy.
Video

Video Passover Celebrates Liberation from Bondage

Jewish people around the world are celebrating Passover, a commemoration of their liberation from slavery in Egypt more than 3,300 years ago. According to scripture, God helped the Jews, led by Moses, escape bondage in Egypt and cross the Red Sea into the desert. Zlatica Hoke reports that the story of the Jewish Exodus resonates with other people trying to escape slave-like conditions.
Video

Video Police Pursue Hate Crime Charges Against Kansas Shooting Suspect

Prosecutors are sifting through the evidence in the wake of Sunday’s shootings in a suburb of Kansas City, Missouri that left three people dead. A suspect in the shootings taken into custody is a white supremacist. As VOA’s Kane Farabaugh reports, he was well-known to law enforcement agencies and human rights groups alike.
Video

Video In Eastern Ukraine, Pro-unity Activists Emerge from Shadows

Amid the pro-Russian uprisings in eastern Ukraine, there is a large body of activists who support Ukrainian unity and reject Russian intervention. Their activities have remained largely underground, but they are preparing to take on their pro-Moscow opponents, as Henry Ridgwell reports from the eastern city of Donetsk.
Video

Video Basket Maker’s Skills Have World Reach

A prestigious craft show in the U.S. capital offers one-of-a-kind creations by more than 120 artists working in a variety of media. As VOA’s Julie Taboh reports from Washington, one artist lucky enough to be selected says sharing her skills with women overseas is just as significant.
Video

Video UN Report Urges Speedier Action to Avoid Climate Disaster

A new United Nations report says the world must switch from fossil fuels to cleaner energy sources to control the effects of climate change. The Intergovernmental Panel on Climate Change released the report (Sunday) following a meeting of scientists and government representatives in Berlin. The comprehensive review follows two recent IPCC reports that detail the certainty of climate change, its impacts and in this most recent report what to do about it. VOA’s Rosanne Skirble has the details.
AppleAndroid