As West fears Tunisia collapse, hopes of bailout fade

TUNIS

Western nations fear an economic collapse in Tunisia could trigger even greater migrant flows to Europe and have offered financial assistance. Yet prospects of Tunisia's sealing the biggest deal of all, a $1.9-billion bailout from the International Monetary Fund (IMF), seem increasingly remote.

The inflation-ravaged and heavily indebted country reached a tentative deal for the loan from the Washington-based IMF in October.

It would require Tunis to undertake what the IMF calls a "comprehensive economic reform program" that would phase out subsidies on fuel and electricity.

But President Kais Saied has repeatedly rejected "foreign diktats that will lead to more poverty."

In March, U.S. Secretary of State Antony Blinken warned Tunisia urgently needs to reach an IMF deal because its economy "risks falling off the deep end."

That followed European Union foreign policy chief Josep Borrell's concern that a collapse "economically or socially" in Tunisia would trigger a new flow of migrants to Europe, an assessment rejected by Tunis.

Italy says migrant arrivals by sea have surged this year, most of them from Tunisia and Libya.

"Tunisia is a nation that is in extreme distress and clearly leaving it to its fate can have consequences that are very serious," Italian Prime Minister Giorgia Meloni told reporters in Rome on July 23 at a conference with Saied and other Mediterranean leaders.

Beyond the economic situation, the European Union and Washington have been troubled by Saied's increasing authoritarianism.

He has seized far-reaching powers since sacking the government in July 2021. He later dissolved parliament and pushed through a constitution to replace one approved in 2014 following the country's Arab Spring revolution.

Struggling with joblessness and inflation exacerbated by the fallout from Russia's invasion of Ukraine, many Tunisians have joined sub-Saharan Africans in an exodus from Tunisia, which lies just 130 kilometers from the Italian island of Lampedusa.

The European Union in June said it could offer a long-term loan of around 900 million euros ($1 billion) to the country "following (the) IMF-supported reform program."

But Aram Belhadj, a lecturer and researcher at Tunisia's University of Carthage, said the IMF agreement "is blocked" because Saied "rejects the reforms proposed," particularly on fuel subsidies as that would lead to higher costs for public transport and deliveries.

Tunisian consumer prices are already projected to rise 10.9 percent this year, according to the IMF.

"If by the end of August there is no clarification on the position of Tunisia, the IMF agreement will be buried once and for all," Belhadj said.

According to economist Ezzedine Saidane, the president saw "things which would penalize him politically" in the required reforms.

Under the IMF deal Tunisia would also have to restructure 100 state-owned firms that hold monopolies over many parts of the economy and are often heavily indebted.

"It's Tunisia which blocked" the agreement, Saidane said, and now, "negotiations are completely stalled."