Tunisia, the IMF, and alternatives

President Kais Saied’s statement during a speech on April 6 claiming to reject the conditions, or “diktats” as he called them, that come with a potential loan from the International Monetary Fund (IMF) has provoked debate. Reactions to the speech as well as actions taken by Tunisian officials before and after it seem to contradict its intention, causing confusion over whether the deal is still on and why, if a president with such concentrated powers rejects something, it is not effected immediately. Meanwhile, others took the speech as a sign — ominous for some and hopeful for others — that Tunisia is seriously considering the possibility of alternatives to IMF financing or even a geopolitical reorientation.

An ideological shift?

While Saied had initially maintained a “cultivated ambiguity around ideology,” in recent months he seems to be hinting at a geopolitical reorientation away from Western financing, using what several analysts have called Saied’s “anti-colonial” ideology. After Saied’s comments about the IMF on April 6, he was asked a follow-up question by a journalist on what the alternative is, to which he responded: “the alternative is to rely on ourselves.” This suggests some ideological affinity with what Max Ajl identifies as the “auto-centered development” vision of a previous generation of Tunisian thinkers like Slaheddine el-Amami, who in April 2022 was honored with a place on the new 5-dinar bill. So far Saied seems to have largely limited his tools for pursuing this development path to tax reform and recovering embezzled public funds, although Amami’s ideological inheritors insist on agrarian reform and food sovereignty while the Observatory for Tunisian Economy (OTE) calls for debt relief.

At the rhetorical level, Saied has prioritized discourse about Tunisian sovereignty. Economically that sovereignty is clearly jeopardized by a debt spiral. Tunisia’s debt-to-GDP ratio is about 90% by some estimates — well above the IMF’s own 70% threshold for debt sustainability — and fiscal reform through the austerity demanded by the IMF is incapable of reducing this, according to a study by Kristina Rehbein. For reference, when Tunisia turned to the IMF for a loan for the first time in two decades in 2013, its debt-to-GDP ratio was only about 44%, and it is precisely Tunisia’s debt built up to the IMF and the World Bank since that series of loans began in 2013 that needs servicing through a new IMF loan (and other multilateral financing that will be unlocked by the loan), as debt to the two international financial institutions comprised more than 40% of Tunisia’s external debt profile, according to official numbers from September 2021.

Who is for the IMF deal, who is against?

The president’s April 6 speech indicates a policy preference seemingly at odds with that of: the Tunisian government, whose reform proposal (almost entirely “fiscal” reform via more austerity) is widely understood to be a condition for the IMF to approve a new $1.9 billion loan to Tunisia; the Central Bank of Tunisia’s (CBT) executive board, which in over a year of press releases (until a notable divergence in March 2023) has consistently claimed that acquiring IMF financing is urgent; European governments, especially that of Italy, which has been lobbying for the IMF loan with increasing verve (a verve matched simultaneously and perhaps not-so-coincidently by Tunisia’s increasingly virulent anti-migrant policy that Italy has been funding); and lately the EU and the U.S., whose respective top diplomats publicly urged Tunisia to sign the loan. Additionally, the big three international credit ratings agencies have cited the lack of an IMF loan as the main factor behind their downgrading of Tunisia’s sovereign bond ratings in recent months, and the resulting poor credit ratings have hampered imports of basic and vitally needed goods like wheat.

But there seem to be other officials or institutions of the state who are on board with his apparent rejection of the IMF. A recent op-ed in the official TAP news agency seemed to take Saied’s side while castigating the CBT and the Ministry of Economy and Planning for backing the IMF deal. But even within the CBT there may be a shift at play. While the CBT’s executive board statements had for months called for the urgent signing of an IMF deal, in the release from its March 22, 2023 meeting, the bank conspicuously left out a call for a deal and instead merely noted “the need to raise the required external financing” without specifying the source. On April 8, a Saied-supporting politician claimed that Tunisia would reject the IMF and instead “join BRICS,” referring to the grouping of Brazil, Russia, India, China, and South Africa. Although that claim hasn’t been authenticated or verified, on April 10 China’s Foreign Ministry spokesperson answered a question about Tunisia joining by reiterating support for “promoting discussions among BRICS members on BRICS expansion process,” and on April 11, Sen. Chris Murphy suggested that Tunisia was in talks with China for a debt financing deal.

BRICS: Tunisia vs. France

For now, the BRICS Contingent Reserve Arrangement is reserved for BRICS members and is not yet operating as an alternative to the IMF, despite speculation that it could potentially do so. Meanwhile the so-called BRICS bank — the New Development Bank (NDP) — operates more along the lines of the World Bank than the IMF; notably Egypt, which like Tunisia is also facing debt sustainability issues after a decade of IMF loans, became the third non-BRICS country to join the NDP this February.

Although there is speculation China is in discussions with Tunisia to bail it out on a bilateral basis, this comes just after China hosted French President Emmanuel Macron, a trip which seemingly catalyzed, or at least ended with, a Macron statement warning Europe not to be a “vassal” of the United States in a potential conflict with China. Given Tunisia’s cheap supply of labor, agricultural products, and manufacturing to France, it is likely that the French government would not be pleased if China were to help Tunisia move away from Western financing; if Beijing’s strategic choice comes down to either pulling Tunisia away from the West or France from the U.S., France seems by far the bigger prize. It’s also worth considering that just weeks before Saied’s April 6 speech, China’s ambassador to Tunisia had reportedly also voiced support for an IMF deal.

Aside from the BRICS alternative, there are once again renewed rumors of a Gulf bailout facilitated by Algeria, but so far the Gulf also seems to have tied its financing commitments to an IMF deal.

Is the deal dead?

Following the president’s speech, Tunisia’s minister of economy and planning, Samir Saied, and the governor of the CBT, Marouane Abbasi, were in Washington heading an official delegation during the World Bank and IMF spring meetings. This signaled that Saied’s rhetoric against the IMF wasn’t necessarily definitive, with some speculating that he was merely using strong language to press for better terms for an IMF loan, while others questioned whether the president’s anti-IMF policy preference was being undermined by his own officials.

Meanwhile Jihad Azour, the director of the IMF’s Middle East and Central Asia Department, released a statement claiming that the IMF had not received any request from the Tunisian authorities “to reconsider the program.” Azour also explicitly rejected Saied’s use of the term “diktats” to characterize the loan program, adding that “the Fund did not impose any diktats … this program has been designed proudly by the Tunisian authorities.” In fact, the authorities who have been implementing some of what the IMF refers to as the program’s “prior actions” include President Saied himself: Despite denouncing in his recent speech the subsidy reductions expected by the IMF and the unrest they would likely produce — specifically citing the deadly bread riots in 1983-84 prompted by World Bank and IMF recommended subsidy cuts — Saied’s own budget law for 2023 included subsidy reductions and other austerity measures that are seen as conditions for receiving the loan.

What Azour did not mention is that, although recently even the IMF has begun to entertain criticism of austerity policies, only a so-called “home-grown” Tunisian program that sufficiently aligns with the austerity views still dominant within the IMF and which excludes steps toward debt relief will unlock the new loan. Some have predicted that in the absence of either an IMF deal or alternative financing, Tunisia is likely to default on some of its debt payments later this year or early next year; in that case there will still need to be some mechanism to either find some other financing and/or work toward a debt jubilee as the OTE has called for, both of which will require intensive planning and coordination by Tunisian officials.

U.S. Secretary of State Antony Blinken said in his recent testimony to the Senate that “the post-Cold War world is over,” reflecting growing great power competition — though this time not between competing economic systems but within a capitalist world. Yet Saied’s apparent intention to find an alternative to a U.S.-dominated bloc may be premature, before a nascent geopolitical alternative is consolidated, or before China wishes to accelerate existing trends.

Fadil Aliriza is the founder and editor-in-chief of Meshkal.org, an independent news website in English and Arabic covering Tunisia, and a Non-Resident Scholar with MEI’s North Africa and Sahel Program.

Photo by Samuel Corum/Bloomberg via Getty Images