Summary:

On Tuesday, 13 June 2023, international press reports indicated that an unidentified Tunisian official said that the government planned to present a revised economic reform plan to the International Monetary Fund (IMF) for consideration.

Few details were provided in initial press reports, which did not indicate a timeline for a revised plan or what another stage of negotiations with the IMF might involve. The initial agreement reached in late 2022 was the product of many of months of technical negotiations that included a number of Tunisian ministries.

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The report of a potential revised reform plan came following a 12 June meeting between US Secretary of State Antony Blinken and Italian Foreign Minister Antonio Tajani in Washington, DC. During comments to the press, Secretary Blinken indicated that the US would “welcome the Tunisian Government presenting a revised reform plan to the IMF and for the IMF to be able to act on the plan presented.” However, Blinken noted that these are Tunisia’s decisions to make.

Italian officials have been engaged in an aggressive campaign to push through the IMF deal while also marshalling broader European financial support for Tunisia. A recent G7 summit and a visit by a team of European leaders to Tunis produced promises of increased European financial aid, but all still tied to the implementation of an IMF loan deal. Italy had previously voiced growing support for a financial bailout for Tunisia that might precede any necessary reforms.

Meanwhile, the World Bank announced on 15 June a Country Partnership Framework (CPF) with Tunisia covering the next five years of economic partnership. The CPF includes extensive assessments of Tunisia’s future, nothing that the country is experiencing “simultaneous political, constitutional, and economic crises together with the need to fundamentally change its economic model.”

The CPF ultimately identifies a similar set of economic challenges and needed reforms that the IMF had previously identified with a heavy focus on reforming the public sector. The report asserts that “Tunisia needs to fundamentally change its development model to reframe the role of the state and create the basis for a growing economy that generates private sector jobs.”

Outlook:  

If rumors around Tunisia submitting a revised reform plan to the IMF prove true, it will likely further extend the negotiation process and therefore continue to increase the pressure on the Tunisian economy.

Italy and other countries have been increasingly vocal calling for “flexibility” from the IMF, but it remains to be seen how much pressure will be exerted practically on the IMF’s technical negotiations with the Tunisian government. While President Kais Saied has been openly skeptical of the IMF deal, other indications from the Tunisian administration have pointed to ongoing, if delayed efforts to meet Tunisia’s obligations to receive the loan funds.

Further delays in the process will continue to increase fiscal risk within the Tunisian financial system and frustrate Tunisia’s poorer citizens, amongst whom frustration has been growing about shortages and price increases.

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