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.
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

How to Safeguard Your Mobile Privacy

As the digital world becomes more mobile, so too do concerns about eroding privacy and increased hacking More

'Desert Dancer' Chronicles Iranian Underground Dance Troupe

Film by Richard Raymond is based on true story of Afshin Ghaffarian and his friends More

Obesity Poses Complex Problem

Professor warns of obesity’s worldwide health impact More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam Wari
X
Katherine Gypson
May 25, 2015 1:32 AM
For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam War

For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Female American Soldiers: Healing Through Filmmaking

According to the United States Defense Department, there are more than 200-thousand women serving in the U.S. Armed Forces.  Like their male counterparts, females have experiences that can be very traumatic.  VOA's Bernard Shusman tells us about a program that is helping some American women in the military heal through filmmaking.
Video

Video Iowa Family's Sacrifice Shaped US Military Service for Generations

Few places in America have experienced war like Waterloo. This small town in the Midwest state of Iowa became famous during World War II not for what it accomplished, but what it lost. As VOA’s Kane Farabaugh reports, the legacy of one family’s sacrifice is still a reminder today of the real cost of war for all families on the homefront.
Video

Video On Film: How Dance Defies Iran's Political Oppression

'Desert Dancer' by filmmaker Richard Raymond is based on the true story of a group of young Iranians, who form an underground dance troupe in the Islamic Republic of Iran. This is the latest in a genre of films that focus on dance as a form of freedom of expression against political oppression and social injustice. VOA’s Penelope Poulou has more.
Video

Video Turkey's Ruling Party Trying to Lure Voters in Opposition Stronghold

Turkey’s AK (Justice and Development) Party is seeking a fourth successive general election victory, with the goal of securing two-thirds of the seats in Parliament to rewrite the constitution and change the country's parliamentary system into a presidential one. To achieve that, the party will need to win seats in opposition strongholds like the western city of Izmir. Dorian Jones reports.
Video

Video Millions Flock to Ethiopia Polls

Millions of Ethiopians cast their votes Sunday in the first national election since the 2012 death of longtime leader Meles Zenawi. Mr. Meles' party, the Ethiopian People's Revolutionary Democratic Front, is almost certain of victory again. VOA's Anita Powell reports from Addis Ababa.
Video

Video Scientists Testing Space Propulsion by Light

Can the sun - the heart of our solar system - power a spacecraft to the edge of our solar system? The answer may come from a just-launched small satellite designed to test the efficiency of solar sail propulsion. Once deployed, its large sail will catch the so-called solar wind and slowly reach what scientists hope to be substantial speed. VOA’s George Putic reports.
Video

Video FIFA Trains Somali Referees

As stability returns to the once lawless nation of Somalia, the world football governing body, FIFA, is helping to rebuild the country’s sport sector by training referees as well as its young footballers. Abdulaziz Billow has more from Mogadishu.
Video

Video With US Child Obesity Rates on the Rise, Program Promotes Health Eating

In its fifth year, FoodCorps puts more than 180 young Americans into 500 schools across the United States, where they focus on teaching students about nutrition, engaging them with hands-on activities, and improving their access to healthy foods whether in the cafeteria or the greater community. Aru Pande has more.
Video

Video Virginia Neighborhood Draws People to Nostalgic Main Street

In the U.S., people used to grow up in small towns with a main street lined by family-owned shops and restaurants. Today, however, many main streets are worn down and empty because shoppers have been lured away by shopping malls. But in the Del Ray neighborhood of Alexandria, Virginia, main street is thriving. VOA’s Deborah Block reports it has a nostalgic feel with its small restaurants and unique stores.

VOA Blogs