EU offers Tunisia €150 million in financial stability help

Cash-strapped Tunisia received an aid of €150 million from the EU to help it with financial stability as it struggles with an unprecedented economic and financial crisis.

The Tunisian economy has faced headwinds due to self-inflicted measures by authoritarian president Kais Saied, who rejected IMF financing terms sending his country’s finances into uncharted territory.

The outlook for Tunisia remains gloomy due to divestment and drought in part. The Tunisian economy is expected to grow by only 1.9% in 2024, according to the IMF. The growth rate is not enough to curb unemployment, currently at about 16%.

Inflation was already at 8.1% last year and is expected to further raise and take a monetary character as the central bank accepts direct funding of the government.

Tunisia’s president Kais Saied has asked for direct borrowing from the central bank to finance the state budget and shore up public finances, hit by sluggish economy.

Critics argue that the central bank would be the latest target in the process of presidential power grab that previously undermined the roles of the parliament and the judiciary.

The estimated budget deficit in 2024 would stand at $3.2 billion, with the president seeking to plug it up with direct financing from the central bank with $2.25 billion.

Resorting to the central bank comes after Tunisia failed to secure a $1.9 billion IMF loan, which stalled after the president rejected conditionalities relating to subsidy reform.

Like its bigger neighbor Algeria, Tunisia’s social peace has hinged on state subsidies and an inflated civil service.

Tunisia’s financial crisis has been manifested in a shortage of basic goods as the government tries to restrict the outflow of foreign exchange reserves.