Tunisia’s ongoing political crisis, fueled by tensions over the cabinet reshuffle and magnified by the assassination of opposition leader Chokri Belaid, may not have critically affected the country’s already ailing economy, but its indirect consequences are already revealing themselves.
The country’s economy faced serious challenges even before the current political tension; but it has started to feel the impact of the fallout, according to economic expert Radhi Meddeb.
“An immediate collateral effect is the downgrading of the country’s sovereign risk rating, limiting the country’s ability to access capital markets but also affecting the fluidity of the activity of local SME’s (small-and medium-sized enterprises) and their exports,” Meddeb said in an interview with Tunisia Live.
Standard and Poor’s rating agency issued a report February 19 in which Tunisia’s credit rating sank further into junk-grade status, from BB to BB-. Even though the downgrade preceded the resignation of Tunisian Prime Minister Hamadi Jebali, the instability of the political situation is blamed for creating a “high-risk” image of the country to international investors.
And the tourism sector remains the most affected with “an unprecedented level of booking cancellations,” Meddeb said.
Moez Laabidi, another economic expert, had a more optimistic view of the situation.
“My evaluation of the current economic situation is that it’s not disastrous,” he said. “The economic machine is not broken; it’s only temporary.”
Yet Laabidi acknowledged that the political turmoil has “polluted” the business climate and might disastrously impact the economy if the cabinet’s indecisiveness continues.
Following the popular uprisings of January 2011, the constitutional elections of October restored Tunisians’ faith in the political process after a period of shock.
“People who were too afraid to invest after the revolution were reassured by the political maturity after the elections. … Now, the absence of a clear vision of the future made Tunisians lose faith in their leaders,” Laabidi said.
Before the official rejection of Jebali’s proposal to form a nonpartisan, technocratic government on Monday as a solution to the delay in the cabinet reshuffle, two potential scenarios were hotly debated: Jebali’s initiative versus a new government based on a political coalition.
Economic experts welcomed the prime minister’s proposal pending approval of the National Constituent Assembly (NCA).
“A technocratic government would have been an efficient solution as political coalitions always have side effects. … For instance, we stayed for a whole year without a minister of finance because Ettakatol was not able to find a qualified alternative,” said Moncef Cheikhrouhou, an economist who is also an NCA member.
During his public resignation Tuesday, Jebali stated that he was still convinced that a government composed of technocratic ministers would end political tensions, and thus the country’s crisis.
“It’s a reasonable solution,” Laabidi said. “But if applying it means going against the NCA’s will, then it’d be best to avoid deepening the crisis, as the NCA represents legitimacy.”
Additionally, he explained that the political coalition scenario could work if the constitution drafting process was accelerated and transitional bodies and laws agreed upon. Delays have filled Tunisians with doubt, and the government’s success may very well depend on its ability to gain people’s trust.
The government is regarded to be primarily responsible for the country’s economic failure, said Laabidi, even though other factors have contributed to the crisis as well.
“When people saw that higher officials at the government are assigning their relatives or in-laws in governmental positions, regular citizens started demanding higher salaries,” Laabidi explained.
As a direct consequence in the private sector, businessmen succumbed to union pressure and agreed to provide higher salaries, while raising the prices of products and services in return. The result was rising inflation.
In the public sector, similar demands for higher salaries have prevailed. The state was obliged to compromise and prefered to fall further in debt and avoid raising taxes.
“We can’t realize the weight of the debt now, but with time it is becoming a huge burden,” Laabidi added.
Reuters wrote that Tunisia has been attempting to reassure the International Monetary Fund by adopting more effective budget strategies in order to obtain a $1.78 billion loan. However, the mission has become more challenging since Belaid’s assassination, given the increased political tension among the different parties.
Both Laabidi and Meddeb agreed that Tunisia must adopt drastic reforms in order to end the economic crisis. But such reforms require a national debate and consensus. The absence of an economic model, based on sustainable and inclusive development, was one of the catalysts for the revolution, Meddeb said.
“Quick wins must be identified and implemented essentially at the level of job creation, education system, better infrastructure, and improving social conditions … through a better governance and a clear regional development plan … And this is doable,” Meddeb said.
“These political tensions are not the cause of the economic crisis,” Cheikhrouhou added, but regaining the faith of Tunisians is a necessity.