Tunisia’s permanent state of flux
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Since the Jasmine Revolution, Tunisia has been paralyzed by a convergence of political and economic turbulence, leaving the North African country in a near-permanent state of flux, which threatens to plunge it into an abyss far deeper than the upheavals of 2011 or the post-2013 stagnation. The once highly touted democratic gains have all been erased by a political climate mired in autocratic backsliding, as exemplified by the dissolution of parliament, suspension of the constitution and a consolidation of ruling authority in a “hyper-presidency.”
As 2024 is an election year in Tunisia, the stakes for the country’s “new” ruling elite have never been higher. The compromising factors are myriad but can be distilled down to profound economic regression, imbalances in public finances, a decreased reliance on external funding and an alarming recession that threatens long-term growth prospects. Thus, Tunisia is ambling into an inescapable trap between a tough economic adjustment, which risks triggering a sociopolitical crisis, and inaction that could lead to an economic meltdown, from which piecemeal solutions and the scapegoating of migrants will offer no salvation.
Notably troubling is the inexplicable stalemate with the International Monetary Fund — a perhaps reluctant but necessary partner in stabilizing Tunisia’s financial future. After all, Tunisia’s economic challenges are deep-rooted and multifaceted, necessitating an unprecedented mobilization of internal and external support mechanisms to rescue the country from the brink. Tunisia’s public debt remains alarmingly high, a stark indicator of the fiscal imbalances that have continued to plague a stagnating economy that was projected to grow by just over half a percent for all of 2023.
Meanwhile, a fatigued agriculture industry due to adverse weather, combined with the underperformance of the tourism sector, signal policy failures and systemic deficits, particularly the inability to capitalize on the post-pandemic global reopening. Private investment, once the linchpin of job creation, has also faltered. The public sector’s swelling size and the informal sector’s growth only underscore the shrinking catalytic role of Tunisian entrepreneurship. A plummeting investment-to-gross domestic product ratio — from 25 percent in the early 2000s to under 10 percent today — crystallizes the economy’s irreversible descent.
Tunisia is ambling into an inescapable trap between a tough economic adjustment and inaction that could lead to a meltdown
Hafed Al-Ghwell
More worryingly, election years typically see larger expenditures, since the ruling elite resort to doling out public cash to “buy” legitimacy. In Tunisia’s case, it will only tighten an already constricted fiscal space, as shown in the 2024 budget’s troubling prioritizations. A staggering 77 percent of allocations are directed toward government debt service, civil sector pay and subsidies, leaving less than 7 percent for critical investments targeting, for instance, job creation in the private sector.
It raises significant questions about the sustainability of public finances and the country’s economic development vision as oil prices edge higher, coupled with a volatile dollar exchange rate. Convergent impacts of global crises, from the war in Ukraine to convulsions in the Middle East and even climate change, necessitate a reevaluation of state budgeting. However, the Tunisian parliament’s rubber-stamping of Carthage Palace’s budget law indicates a troubling continuation of past fiscal practices, with an overreliance on government debt and payroll expenditures.
Such an approach not only limits the room for crucial investments but also casts a shadow over the medium-term prospects of the country, especially given the troubling structure of Tunisia’s state resources. It mandates robust reforms and a prudent fiscal strategy to navigate the imminent economic difficulties posed by excessive borrowing and unbalanced public finances. According to Fitch Ratings, a credit rating agency, the fiscal financing gap is substantial, pegged at more than 16 percent of GDP annually until 2025.
The dimming prospects of a deal with the IMF heighten the urgency for serious interventions, both locally and from partners abroad, lest the current trajectory makes Tunisia’s plunge inevitable. Even as Fitch predicts the Tunisian government could procure about $2.5 billion in 2024, a cloud of uncertainty looms over these projections. This includes anticipated loans from Saudi Arabia and the African Export-Import Bank that are currently not guaranteed. Without a clear path forward and with challenging Eurobond repayments on the horizon, Tunisia’s economic resilience hangs in the balance.
Preparing for the potential of a default scenario is an unavoidably pragmatic step. Donors and global partners should be ready to supply emergent aid to avoid a complete societal breakdown that would accompany a collapse. However, international involvement must transcend mere crisis management; it must facilitate the resumption of constructive dialogue toward a sustainable and inclusive economic model, as well as a new social contract.
The dimming prospects of a deal with the IMF heighten the urgency for serious interventions, both locally and from abroad
Hafed Al-Ghwell
Yet, such a task will be daunting in Tunisia’s current political climate, which eschews external influences that are increasingly perceived as colluding with the gilded few at the expense of the broader population. After all, mandating austerity as a remedy for Tunisia’s woes will only deepen social discontent, in contravention of top-down populism that ransacks the national budget to placate unrest while ignoring underlying vulnerabilities. Thus, the prospect of negotiating with international bodies like the IMF for relief or restructuring has become a double-edged sword, promising temporary respite while also setting the stage for social upheaval.
On the sociopolitical front, Tunisia’s authoritarian drift has not only alienated the populace and deepened political divisions, but also deterred foreign investors and international partners, whose support is crucial for Tunisia’s recovery. External pressure on human rights and democratic governance, while necessary, must now be delicately balanced with efforts to prevent economic collapse. It leaves the international community in a stifling dilemma of having to choose between averting worst-case scenarios of a total meltdown and the complete erosion of Tunisia’s hard-fought democratic foundations.
Tunisia’s current trajectory points toward an intractable “polycrisis,” characterized by economic insolvency, political instability and social unrest. The gravity of the situation demands a multifaceted approach that goes beyond mere financial bailouts. International actors, alongside local stakeholders, must work collaboratively to address the root causes of Tunisia’s maladies. This includes advocating for political reforms that restore democratic norms, supporting economic policies that spur growth and reduce debt, and fostering a societal dialogue to heal the divisions.
The path forward is fraught with challenges, which the Tunisian government and its existing fiscal policies are unprepared to confront without substantial external support and internal reform. It is a stark reminder of the turbulent path transitioning societies often encounter and the international dimension of their struggle for stability, sovereignty and sustainability. However, the alternative — state collapse — would have far-reaching implications not just for Tunisia but for the entire region.
- Hafed Al-Ghwell is a senior fellow and executive director of the North Africa Initiative at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies in Washington, DC. X: @HafedAlGhwell
