Negotiations with the IMF: Beware of Missteps!

Although the economic reform document related to the negotiations with the IMF, according to the Minister of Economy and Planning, Samir Saied, is “ready and complete” and that “the negotiations with the Fund are on the right side”, some Tunisian experts and financiers are still worried.

According to financial expert Moez Laabidi, the International Monetary Fund’s (IMF) hesitation during the negotiations is mainly due to the fragility of the democratic situation in Tunisia. During a pass on the waves of a private radio, he takes stock of the national debt in the light of the negotiations with the IMF. “We do not live under the protection of a dictatorial regime capable of implementing certain reforms, nor within a democratic regime capable of implementing and respecting the recommended reforms. The IMF needs guarantees regarding the implementation of the reforms proposed by Tunisia,” assured Laâbidi.

The financial expert also commented on statements by IMF Director Kristalina Georgieva on the progress of talks with representatives of Tunisia, Egypt and Sri Lanka: “Tunisia enjoys the confidence of the IMF as it has so far not appealed on the structuring of its debts”. He also added: “The IMF can impose on Tunisia the restructuring of its debts as a condition for the conclusion of the agreement.

This possibility could be a solution to all the financial problems Tunisia is going through. On the other hand, this path requires a strong political will to revitalize the Tunisian economy by accelerating the energy transition to reduce hydrocarbon imports. Strong political will and a clear vision of the reform process and their relevance are needed. These reforms must hit strategic sectors to ensure a proper recovery of the national economy.” Laabidi further explained that: establishing tax justice is the way to implement reforms to regain the confidence of Tunisians who are willing to make sacrifices.

Real reforms to save the country

“Simple solutions to provide financial resources without committing to real reforms will not save us from the debt swamp.” For Moez Laabidi, Tunisian debts to donors are indisputable and must be repaid on time. On the other hand, bilateral loans provided by neighboring and friendly countries can be subject to negotiation and this falls under the role of economic diplomacy.

With regard to the rise in inflation, Laâbidi mentioned that countries that experience a rise in inflation and a fall in savings also experience a fall in investment. “We cannot bet on Tunisia’s currency reserves, which are constantly falling,” he said.

He also explained that debt is not a problem in absolute terms. “What matters is the rationale for this indebtedness, especially if the credits are allocated to fill a deficit or repay past debts.” According to Laâbidi, several states are experiencing an acute financial crisis due to over-indebtedness. He gave the example of Egypt, which is facing an unprecedented crisis, despite the reforms implemented in the area of ​​subsidies and rationalization of state spending. “These reforms cannot be implemented in a democratic or democratic transition context. The transparency of the Egyptian economy is dialectical, especially with the government’s withholding of various data.” This country has seen its debt increase due to the numerous foreign financing obtained. “Egypt’s public debt is at a record and alarming level,” he said.

The blame can Dig deeper

Laâbidi also explained that leaving the external financial markets is not the ideal solution, as interest rates could be higher than 22% (in dollars) and 31% (in euros). “Experience has shown that in other countries, such as Egypt or Sri Lanka, where interest rates have reached 38%, these rates are excessive and excessive.”

It is clear to the financial expert that the Tunisian debt crisis is deepening as the state goes into debt without implementing structural reforms. “Even if Tunisia manages to obtain loans with low interest rates, this will not solve the economic and financial crisis and will only increase the burden on future generations. It is clear that the main causes of the current economic situation are the sovereign debt crisis, political instability and the vagueness surrounding the organization and dates of the elections,” said Laâbidi.

More reforms little known!

For his part, economic and financial expert Moez Hadidane estimated that Tunisia could obtain financing from the Monetary Fund, especially after Georgieva’s latest statement confirming that negotiations with Tunisia are progressing. Still, Hadidane found the statement by the IMF director, Kristalina Georgieva, about the situation in Tunisia and the conditions imposed by the IMF regarding the restructuring of certain countries’ debts shocking. The expert considered the indicators encouraging and Tunisia has to make sacrifices. “Today, an appeal to the IMF is inevitable. The fact remains that the content of these reforms that will be proposed remains unknown and quite confidential so far,” he assured.

For Hadidane, “the IMF believes that it is not possible to continue negotiations before Tunisia considers restructuring its bilateral debts with other countries”. He explained that according to the IMF, Tunisia will not be able to repay its bilateral debts, even if an agreement is reached with the IMF, making an appeal to the Paris Club essential. “Applying to the Paris Club for debt restructuring is not a danger and Tunisia might be forced to go there in order for the negotiations with the IMF to succeed,” he concluded.

Economic expert Ezzedine Saïdane also spoke on private radio and said the publication of the medium-term economic outlook for Tunisia by the International Monetary Fund (IMF) depends on the follow-up of negotiations with the Tunisian authorities.

“These prospects will vary depending on the formation of this agreement. And it is for the same reason that the results of Tunisia’s medium-term economic outlook have not been published by the IMF.” The economic expert explained that the Tunisian delegation has presented its program to the IMF, but “political problems and the state of emergency in Tunisia have hampered the negotiation process with the IMF, which takes responsibility for the financing granted to certain countries. .

It should also be remembered that the IMF’s decision will affect the position of donors who rely on the IMF’s assessment and attitude to lend,” he said.

Saidane added: “Like the rating agencies, the IMF is also interested in the political situation in the countries that request it”. And the absence of the finance minister during the negotiations with the IMF could arouse mistrust. According to him, “The Finance Minister should have been present at the IMF negotiations with the Governor of the BCT, Marouane Abassi, and the Minister of Economy, Samir Said, especially since the BCT is independent and cannot participate in instead of the Tunisian state”.

Economic expert Aram Belhadj, meanwhile, published a status on his Facebook page showing that the failure to publish the medium-term outlook for the evolution of the Tunisian economy, between 2023 and 2027, in his latest report, sets a precedent. According to the IMF, the continuation of technical talks between the IMF and the Tunisian government, pending the conclusion of an agreement between the two parties, would be the cause. “This unexpected decision suggests that the IMF is not sufficiently convinced by the reform program proposed by Tunisia and by the promises of the Tunisian government,” he lamented.

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