Tunisian Central Bank Is Knocking on the Gulf Doors for New Loans Due to Bankruptcy
On Friday 15 October 2021, Abdel Karim Lassoud, Director General of Finance and External Payments at the Central Bank of Tunisia, announced through a private Tunisian Radio, that there are "very advanced" negotiations with Saudi Arabia and the UAE to finance the state's resources, as Tunisia is grappling into bankruptcy, according to Anadolu Agency.
The Tunisian official denied the announcements by a number of economic experts that Tunisia is unable to pay citizens’ salaries and its foreign debts.
According to him, reaching an agreement with the International Monetary Fund is the first solution for this critical period.
Forewarning Economic Collapse
Since last July 25, Tunisia has been amid political instability. That day was memorable for most of the Tunisian people, who joyfully went to the streets to support President Kais Saied’s decisions to dismiss Prime Minister Hichem Mechichi, freeze the work of Parliament and hold all powers in one hand. In the light of these exceptional measures that are supposed to save the political dilemma, things are getting worse, and bankruptcy is threatening the country.
Because of this real economic crisis, Abdel Karim Lassoud, Director General of Finance and External Payments at the Central Bank of Tunisia revealed that the country is negotiating with the UAE and Saudi Arabia to obtain more funds for its financial budget.
The Official Director did not specify the nature of the negotiations and he did not mention the exact financial value being discussed. He just told local media that “the door will be opened to mobilize state resources through international cooperation.”
In May 2021, Tunisia started discussing with the International Monetary Fund to obtain a new loan of about 4 billion dollars, but the talks were stopped due to the insatiable political situation in the country.
However, since the sudden extraordinary decisions of the Tunisian President were announced, the UAE and Saudi Arabia have expressed their total support for Tunisia and Kais Saied. They announced they are ready for any financial help, according to the official Abdel Karim Lassoud.
Difficulties Behind
Since 2011, The country's economic scene has been facing difficulties. Taking the economic growth rate as a measure, economic evolution has not exceeded 0.6 percent over the past ten years. In addition, the inflation rate has also risen to 6% amid the health crisis that has exacerbated the situation in the country.
In fact, economic experts revealed on Tunisian media and social media that Tunisia is unable to pay the foreign debts and the citizens’ wages and thus heading the Paris Club to reschedule the debts. However, Abdel Karim Lassoud, Director General denied these announcements. Instead, he stated that Tunisia is able to fulfill its foreign commitments of 2021, on the same radio station.
He added that “with a final agreement with the International Monetary Fund and the launch of activating reforms at the beginning of 2022, there will be no problem in repaying the debts."
Indeed, Abdel Karim pointed out that there are many positive signs concerning the Tunisian economy, especially in the tourism sector.
The official did not give further details about the discussions with Saudi Arabia and the UAE, as there was no immediate comment from the two countries.
Negative Ranking
Tunisia is suffering from a severe economic crisis, as it suffers from a significant lack of financial resources, in addition to the political dilemma.
Thursday, 14 October 2021, Moody's credit rating lowered Tunisia's sovereign rating from B3 to CAA1 with a negative forestation.
The agency said, in a report, that the downgrade to "CAA1" reflects very weak governance and this increased uncertainty regarding the government's ability to proceed with measures that will guarantee renewed approaches to financing, to provide the high needs during the next few years.
Currently, since 2011, this is the tenth time that Tunisia's sovereign rating has been downgraded by international rating agencies.
The Central Bank of Tunisia announced in a statement on October 6, an intense scarcity of external financial resources and a great deficit in financing the current year’s budget, noting that this reality “reflects the fear of international lenders in light of the deterioration of the country’s sovereign ratings and the absence of a new program with the IMF.”
In the same statement, the central bank called for “activating bilateral financial cooperation during the remainder of the year to mobilize as many external resources as possible,” in reference to obtaining loans from allied countries.
In addition to that, the IMF calls for reducing public sector wages, but such a measure risks angering Tunisians, especially after lifting subsidies on food, energy and some other social services; those are among the conditions mentioned in the government's plan presented to the IMF to obtain a loan.
Ben Zayed, Again!
After freezing parliament and assuming power, the President’s goal is clear and is the same as all other Arab autocrats: to consolidate the image of a strong man who can rule alone without the need for any other institution.
Since the Arab spring revolution, the UAE has been trying tirelessly to ruin the Tunisian uprising and the democratic gains. This is not surprising, because
overthrowing the Islamists in the Middle East is a fundamental and strategic goal of Abu Dhabi's Crown Prince Mohammed bin Zayed, who spends billions supporting Arab authoritarian regimes, and for him Kais Saied is on the right roadmap.
MBZ is trying to reproduce the experience of the "strongman" and authoritarian ruler in Tunisia as it did before, and still is, with Abdelfattah al-Sisi in Egypt and Khalifa Haftar in Libya.
Saudi Arabia and the UAE ran right away to support Kais Saied’s “crazy” decisions to make them appear as efficient as possible in front of the World. Accordingly, the two countries expressed their readiness to pay whatever Tunisia needs to get out of the financial crises.
