Tunisia reaches tentative deal on $1.9 billion IMF loan

Tunisia has reached a tentative agreement with the IMF for a €1.9 billion loan.

The deal, announced late Saturday and subject to ratification by the IMF’s board of directors later in December, is expected to open the door to loans from other donors awaiting assurances that the heavily indebted country has committed to reforms that will Part of it is the package. Before the agreement, some analysts predicted that Tunis would be unable to repay its debt and would likely default.

This will be the third deal between Tunisia and the IMF since 2013, and diplomats have warned in recent months that the country has failed to implement previously agreed reforms. These included cutting subsidies, privatizing state-owned companies and cutting public sector wage bills, which are said to be among the highest in the world relative to the size of the economy.

The Tunisian government has “already taken steps to contain public sector wage costs and has begun to phase out general wasteful price subsidies,” the IMF said on Saturday.

The loan would help Tunisia restore fiscal stability, “improve social protection and foster higher, greener and inclusive growth and job creation through the private sector.”

According to the IMF, elements of Tunisia’s reform program include increasing targeted cash transfers to the poor and expanding the social safety net for vulnerable families affected by price increases. The government is also committed to reforming state-owned enterprises.

Earlier this month, long lines of cars formed in front of gas stations due to fuel shortages caused by the central bank’s rationing of foreign currencies.

Kais Saied, the president who rules by decree and amended the constitution over the summer to gain sweeping powers, has accused speculators and hoarders of hoarding commodities and manipulating the market for huge profits.

Until Saied suspended parliament last year, Tunisia was seen as the only example of a successful democratic transition to emerge from the 2011 Arab uprisings. Many Tunisians said at the time that they supported his move because the democratic experiment could not stop the economic decline and rising prices.

But the country’s economic woes have since worsened as Russia’s all-out invasion of Ukraine increasingly strained Tunis’s budget, prompting soaring prices for food and petrol imports.

Raw materials such as sugar and vegetable oil were in short supply. Recent video footage that went viral showed customers jostling each other in a supermarket to snag tight packs of staples.