The possibility of an IMF rescue package worth $1.9 billion for Tunisia was shattered on Friday after President Kais Saied said he would not adhere to “diktats” and that the necessary subsidy cutbacks may cause unrest.
In September, Tunisia and the IMF struck a loan agreement, but the country has already broken important promises, and donors worry that its finances are getting further away from the numbers used to compute the deal.
Without a loan, Tunisia’s economy will collapse. This year, the country must return its foreign loans, and credit rating companies have warned that it could go into default.
Saied said, “I will not hear diktats,” despite the loan’s conditions calling for reductions in public pay spending as well as food and energy subsidies. He stated that “Tunisians must count on themselves” as a substitute for the loan.
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Saied took most of the authority in 2021, shutting down the legislature, installing a new administration, and establishing rule by decree. He justified these actions as being required to put a stop to years of unrest and widespread corruption within the political class.
He disregarded what he considered foreign interference and attributed Tunisia’s economic problems on corruption.
The US and France, among others, have been expecting radical reforms from Saied in order to release the money, which has caused the bailout talks with the IMF to stagnate for months. Italy, a major country for migrants from North Africa, asserts that Tunisia needs immediate assistance to prevent the country’s financial collapse.
Italian Prime Minister Giorgia Meloni warned last month that if Tunisia’s financial stability is not preserved, a massive tide of migrants could reach Europe’s beaches.
