Yassine Gaidi/Anadolu Agency via Getty Images

Tunisia: Back Where It Came From


bob looney teaches economics at the Naval Postgraduate School in California.

Published January 18, 2024


Tunisians — and much of the rest of the world — hoped that the Jasmine Revolution of 2010-11, which ended the rule of autocrat Zine Abidine Ben Ali, would herald a new era of democracy, respect for human rights and prosperity. And initially, there were encouraging signs of progress, with Tunisia being heralded as the sole post-Arab Spring success story.

That was then. The multi-party system that emerged in free elections failed to bring political stability, combat corruption or undertake critical economic reforms. And while Tunisia is still technically a democracy, it has regressed to nearly where it stood before the Arab Spring — but with a weaker economy.

Read it and Weep

For starters, politicians paid little attention to the urgent demand for economic change. Electoral contests between the Islamic Ennahda Movement and the secular Nidaa Tounes Party focused on the role of religion in politics and society. Meanwhile, neither party challenged entrenched business interests, some with links to the ancien Ben Ali regime. By the same token, neither party resisted labor union pressure to increase civil-servant wages, which expanded much more rapidly than the economy.

With the economy adrift, decline set in. Capital formation, which had run up to a fairly healthy at 7.5 percent rate in the decade before the Arab Spring, contracted to a measly 1.4 percent in the face of political instability and economic uncertainty. Exports stagnated. All told, GDP growth, which had averaged 4.2 percent in the decade before the revolution, dropped to 1.6 percent from 2011-16 and 0.8 percent from 2017-22. Deteriorating economic and governance conditions have caused many foreign companies to depart. Three powerhouse pharmas, Novartis, Bayer and GlaxoSmithKline, exited in 2022.

The dismal economic numbers are mirrored in broader estimates of socioeconomic wellbeing. In 2023, Tunisia ranked 99th out of 167 countries on the Legatum’s Prosperity Index — 20 places below its position in 2013.

Fresh out of optimism, in 2019 voters turned to Kais Saied, a jurist and retired law professor with no political affiliation or governing experience. Saied’s victory was overwhelming thanks to his image as decisive and incorruptible. However, since his election Saied has disappointed almost everyone, even as he managed to eliminate most checks on his power. He has tossed much of the old political guard in jail, justifying the arrests with charges of terrorism and subversion, and accusations of causing food shortages. Transparency International’s Corruption Perception ranking for Tunisia fell from 69th out of 180 countries in 2020 to 88th in 2022.

IMF to the Rescue

With the cupboard bare, Saied was forced to seek help from the IMF. In October 2022, the IMF agreed, in principle, to provide $1.9 billion in loan aid over four years. That’s a pretty modest sum. But the idea was that the IMF imprimatur, conditional on belt-tightening and massive restructuring of the government’s role in the economy, would unlock capital from other sources.

It never got that far, though: the IMF’s board refused to approve the loan. Just why is still not clear. One possibility is the Fund was waiting for the government to signal initiation of reforms. As likely, the board had run out of patience with Tunisia, which had signed two similar work-out agreements and then failed to deliver. In October 2023, Saied removed his economy minister after the latter had suggested a deal with the IMF was again in the works.

Nobody else is about to pony up; the country’s junk bond credit rating prevents tapping private markets for additional loans.

Tunisia had a brief window in which to mobilize support for economic reforms. But as the air drained out of the Arab Spring, a zero-sum mentality filled the vacuum — one in which expectations of collective improvement were dissipated and interest groups went back to fighting over the fixed pie.
Lobbing a Hail Mary

Short of reneging on debts and subsisting on current cash flow, what’s the alternative? Saied apparently wants to reduce economic ties with the outside world, restricting imports and turning to state-owned companies and local cooperatives for production, taxing the wealthiest people and companies to raise revenues. Given the climate of fear in the country, there is little open pushback. Most businesses are reportedly wary of speaking up because they fear being targeted by judicial investigations as punishment.

In the same vein, another catch-as-catch-can source of revenue is the “criminal reconciliation” commission Saied established in 2022, perhaps inspired by Mohammed bin Salman’s earlier anti-corruption shakedown of Saudi Arabia’s richest. The commission drops legal proceedings of various sorts in return for penalty payments.

A final source of potential revenue stems from the European Union’s offer of financial support for Tunisia to manage migration flows across the Mediterranean. However, in October 2023, Saied rejected a €127 million offer from the EU. It is problematic whether the EU will come back with a sweeter offer, given Saied’s xenophobic stance on sub-Saharan migration to Tunisia that has driven this group’s desperate attempts to leave Tunisia for Italy.

Although the draft 2024 budget doesn’t specify how Tunisia will cover its financing gap, the path of least resistance is pretty obvious: printing money. In September, Saied announced a review of central bank rules that would prevent deficit monetization, a first step to what seems a tumble into inflation.

What Next?

A couple of lessons seem clear here. Tunisia had a brief window in which to mobilize support for economic reforms that were bound to cause widespread (though hopefully only short-term) hardship. But as the air drained out of the Arab Spring, a zero-sum mentality filled the vacuum — one in which expectations of collective improvement were dissipated and interest groups went back to fighting over the fixed pie. Voters in Tunisia (as in a dozen other countries) turned to an opportunist with an authoritarian/populist pitch.

Contemporary history doesn’t offer a lot of hope that Tunisia with be able to pull itself up by the bootstraps. Indeed, with the world preoccupied by shooting wars, it will be a surprise if Tunisia’s potential allies in Europe are even paying much attention.

But there is an election scheduled for 2024, and it may be free enough to give Tunisians a say in what happens next. Hey, we can hope.

main topic: Region: MENA