Tunisian President: Tax the Rich to Avoid IMF Deal

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Facts

  • Tunisian President Kais Saied on Thursday suggested taxing the country's wealthiest citizens to enable Tunisia to avoid another loan from the International Monetary Fund (IMF) — avoiding what he has called 'foreign diktats.'1
  • He promoted the idea of “taking surplus money from the rich to give to the poor' —  citing a quote attributed to Islam’s second caliph Omar Ibn Al-Khattab — in a meeting with Prime Minister Najla Bouden.2
  • This comes as negotiations between Tunisia and the IMF have stalled after they reached an agreement in principle last October on a $2B bailout package. This is due to the North African country's unwillingness to implement a reform program focused on heavily indebted public companies and subsidies on basic goods.3
  • Saied has argued that the current subsidy system benefits all Tunisians and that the country would be wise to keep them and tax those who benefit from such subsidies.4
  • Meanwhile, the Tunisian parliament approved on Thursday the clauses of a $500M loan from the African Export-Import Bank to fund its 2023 budget. The loan will reportedly have an interest rate estimated at 10.28% and a repayment period of five years, including a two-year grace period.5
  • Tunisia’s debt reached $37B, 79.9% of its gross domestic product, in 2022, with inflation at 10% in May this year. The country has dealt with economic dysfunction for over a decade, with IMF loans for $1.7B in 2013 and $2.8B in 2016 having done little to help the country’s outlook.2

Sources: 1Barrons, 2Al Jazeera, 3Africanews, 4The North Africa Journal and 5The National.

Narratives

  • Establishment-critical narrative, as provided by Foreign Policy. Saied’s decision to reject the IMF’s nearly $2B bailout deal was a difficult, yet correct decision. Tunisia has been down this road before, having already agreed to two nine-figure bailouts in the past 10 years. Neither of those loans did anything to strengthen Tunisia’s long-term economic outlook, and it's unlikely that three times is a charm. The IMF’s offer also has many strings attached that could disrupt the structure of Tunisia’s institutions. While it is always tempting to take large sums of money from international bodies, Tunisia resisted the IMF to bolster its domestic well-being.
  • Pro-establishment narrative, as provided by Arab News. While Tunisia is mired in a decade-long economic crisis, Saied is too stubborn to accept a lifeline from the IMF. As debt consumes Tunisia and inflation makes the cost of living unbearable, there are few viable paths to economic viability. Saied may have some theoretical ideas of how to get out of this predicament without international help, but he has no coherent plan. Tunisia doesn’t have the time or money to fix its problems without the IMF, and the Tunisian people will not accept the continued economic calamity.