A local expert explains what is going on and lays out two possible scenarios for its future.
Supporters of Tunisia's president Kais Saied celebrated after he dismissed the government and froze parliament in July, but discontent is increasing over failure to communicate the way forward. Photo: Reuters
Euromoney’s latest country risk survey shows Tunisia’s investor risks worsening in the third quarter of 2021, in response to the political crisis and an economy on the rocks.
Its country risk score fell by 2.6 points relative to Q2, and it is down by a cumulative 6.8 points so far this year, to a lowly 38 out of a maximum of 100 available. Euromoney’s risk scores are calculated from values assigned by experts to 15 key economic, political and structural risk indicators as well as debt ratings and a measure of capital access.
Given this, Tunisia has crashed 23 places in the global risk rankings this year to 123rd, putting it on a par with Gabon and St Vincent & Grenadines. In contrast, Egypt is 109th and Morocco is a much safer prospect in 52nd place.
Mongi Boughzala, professor of economics at the University of Tunis El Manar, explains Tunisia’s current plight with reference to the Arab Spring in the early 2010s.
Despite it bringing hope of freedom, jobs, prosperity and justice, he says, few of these expectations were met. Unemployment and inflation increased, income growth decreased, and public utilities (health, education and transport, etc) deteriorated, while government debt climbed to nearly 100% of GDP, depleting the “fiscal space”.
“The most important underlying factor of this failure is arguably the inability among political leaders and parties to build the needed consensus over the social and economic transformations required to unlock the country’s potential,” says Boughzala.
“No viable political coalition based on a coherent set of economic and social programmes and reforms consistent with the country’s ambitions has been formed. Although democratic political institutions have been established, the country has been for the last decade politically unstable.”
He notes that the persistent segmentation of the political landscape is to a large extent the outcome of the flawed design of the political regime and the election law.
Although democratic political institutions have been established, the country has been for the last decade politically unstable- Mongi Boughzala
The 2014 constitution instituted a hybrid regime whereby “the government has two adverse heads”, and the election law – with a proportional distribution of seats in parliament – creates no incentive for similar parties to form a coalition and cooperate.
“The outcome has been weak governments dominated by opportunistic parties, primarily the Islamist party (Ennahda), and an inefficient, chaotic and messy parliament," says Boughzala.
“It is not a surprise that most people in Tunisia were in the end fed up with this and unhappy with the performance of the consecutive governments, all accused of corruption and lack of awareness of the real challenges and concerns of the country.”
It was a great relief, therefore, when on July 25, president Kais Saied decided to sack the prime minister (who is officially the head of the government accountable to the parliament and not to the president) and freeze the parliament (because according to the constitution he cannot suspend it), and declared that he would appoint a new prime minister to form a new government.
These actions were taken according to article 80 of the constitution, but the main issue is not so much whether or not the actions were consistent with the constitution, Boughzala says – there has been a consensus over the need to amend the constitution in the country.
“The main issue is that this exceptional situation has been ongoing for more than two months and it is not clear for how long it is going to last and according to which timeline, and the president is cumulating the executive and the legislature.
“Nobody knows to what extent he will delegate authority to the newly appointed PM, Ms Najla Bouden, and her cabinet members. There is a fear that the transitory and exceptional actions will be endless and that the president will not soon enough fully reveal his plan as to the type of government structure he intends to propose to the people by means of referendum.”
It is no wonder that Tunisia’s score for information access/transparency has been downgraded. Although a technical team has been appointed by the president to prepare the way forward, neither the president nor his team have been communicating about it.
In general, the president communicates very little about the most fundamental political issues, according to Boughzala, and much less about economic policy. He has not allowed for any real consultation within the country – he promised “not convincingly enough” to organize a national dialogue, but not when and how.
Boughzala sees the situation as uncertain.
“The president has managed to weaken his position because of his refusal to respond to the basic demand to set a clear road map and to open up to civil society and political parties.
“Obviously, his opponents, including those responsible for the disastrous economic performance, are taking advantage of this weakness.”
Boughzala also lays out two possible scenarios.
The first he considers a stabilizing one. It would occur if a reasonable political reform is proposed by the president and submitted for a true national dialogue involving the main national organizations and political partners. This, he believes, is the more likely and the only viable and rational scenario for the country.
The second scenario would occur if the president’s project is autocratic or inappropriate. This would lead to more social divisions and disagreements, and it would therefore aggravate the already weakened business climate, not to speak of political instability.
Positively, the government now has an interlocutor with the IMF, which is very important. Boughzala remarks that prime minister Bouden “is a brilliant person”, but she and her team need time to set their plan and to be well prepared for talks with the IMF.
There is a chance it will work out before the country’s public financial system collapses, but the outcome may depend a lot on the next actions the president takes.
Encouragingly, Boughzala does not believe the risk of an external payments default is as high as it appears, although he adds that more uncertainty would increase it.
The economy is meanwhile recovering, but slowly, with 3% real GDP growth expected this year by the IMF, after the economy contracted by 8.6% in 2020 and only grew by 1% in 2019, highlighting underlying weaknesses that have worsened because of the pandemic.
The current account at around 7%-8% of GDP underlines a vulnerable imports dependency, and there are inflation and unemployment problems worsened by the collapsing tourism industry.
All of Tunisia’s macroeconomic risk factors have been downgraded.
The country is not yet on a path to prosperity.