* Unlike Egypt, Tunisia moving ahead with budget reforms
* But these are meeting widespread public anger
* Many see hand of IMF behind policies
* Strikes, demonstrations planned in coming weeks
* Agreement on $1.78 billion IMF loan may be threatened
By Tarek Amara
TUNIS, March 13 Protests and strikes planned in
Tunisia over the next few weeks will test the government's
ability to repair its shaky finances - and may affect its
efforts to secure a $1.78 billion loan from the International
In contrast to neighbouring Egypt, where political unrest
has put most economic reforms on hold, Tunisia is pressing ahead
with tax rises and cuts to expensive government subsidies that
are straining the state budget.
Last week authorities raised most fuel prices for the second
time in six months, lifting petrol prices at the pump by 6.8
percent. Taxes on alcohol increased this month, and several
weeks ago the state-controlled milk price rose.
Also this month, the government imposed a levy of 1 percent
on salaries above 1,700 dinars ($1,075) per month to help fund
remaining subsidies on fuel and food.
The steps have met a storm of public criticism. The Tunisian
Organization for Consumer Protection, a consumer advocacy group,
has called for demonstrations this Friday against the fuel price
hike and inflation in general, which could draw thousands of
Taxi drivers plan a one-day strike on March 18 - their first
such mass action in years - which may involve thousands of
drivers. Gasoline station owners have called for a three-day
strike in April, saying higher fuel prices will encourage the
sale of gasoline smuggled from Libya.
"After the spread of poverty and unemployment, now the
middle class is suffering. We can't support deducting 1 percent
of salaries, or the crazy rise of food prices and now fuels,"
said Salem Ben Naceur, a 35-year-old teacher in Tunis.
"We will tell them that the people are very angry and to pay
attention to our reaction."
The government's determination to go ahead with its economic
reforms is striking because it follows some of the worst unrest
in Tunisia since the uprising that overthrew president Zine
al-Abidine Ben Ali two years ago.
The assassination of secular politician Chokri Belaid on
Feb. 6 led to three days of sometimes violent street protests
and the resignation of prime minister Hamadi Jebali. The new
prime minister, Ali Larayedh, last week unveiled a coalition
cabinet led by the moderate Islamist Ennahda party, saying it
would serve only until elections later this year.
With such a limited mandate, the government might be
expected to back down on the economic reforms, at least
partially. But so far it appears determined to see them through,
perhaps because it calculates the economic costs of abandoning
them would be prohibitive.
Late last year the government projected a large budget
deficit of 6 percent of gross domestic product in 2013, and the
outcome could be worse because of the economic costs of the
At the end of last month Moody's Investors Service cut
Tunisia's credit rating to junk territory, joining the other two
major rating agencies, and the cost of insuring Tunisian debt
against a default jumped to a four-year high - exceeding levels
seen during the turmoil of the 2011 revolution.
The money which the government is saving through its recent
steps may go a considerable way to reassuring debt markets that
Tunisia can cut its deficit. Finance Minister Elyess Fakhfakh
said the fuel price rise would reduce the cost of subsidies in
the 2013 budget by 500 million dinars, to 4.2 billion dinars.
The price hike for alcohol would bring in nearly 200 million
Economy Minister Ridha Saidi, speaking last week after the
appointment of the new cabinet, said the government would take
further measures to reduce the budget deficit, such as trying to
cut ministries' fuel consumption by 30 percent. But he insisted
the fuel price hike would stay.
Tunisia's subsidy reform programme is needed partly because
at present, subsidies often end up benefiting wealthier people
rather than poorer ones, he argued.
One problem with such arguments is that they come at a time
when consumers are frustrated by high inflation. Depreciation of
the Tunisian dinar last year helped to boost annual inflation to
a 57-month high of 6.0 percent in January 2013, according to
official data; the rate fell back only slightly to 5.8 percent
in February. Economists say actual inflation, as experienced by
many ordinary people, is around 10 percent.
Another problem is that the economic reforms have become
embroiled with the spectre of foreign involvement in Tunisia's
affairs. Many Tunisians believe the government hiked fuel prices
on the advice of the IMF, as part of an understanding under
which the country would receive its $1.78 billion loan.
The IMF said in early February that talks were at "an
advanced stage" on Tunisia obtaining the precautionary stand-by
loan. The money would come in handy; the central bank's foreign
reserves fell to 11.38 billion dinars, or the equivalent of 107
days of imports, in late February from 12.58 billion dinars or
119 days at the end of 2012.
Saidi insisted that the fuel price hike was not in response
to pressure from the IMF: "The increase in fuel was originally
programmed in the 2013 budget and was an independent decision,
not imposed by any party including the International Monetary
The IMF has not revealed details of its talks with Tunisia.
However, it has made no secret of its desire for North African
countries in general to strengthen their state finances with
subsidy reforms, and many Tunisians see its hand in government
"All prices have risen and high fuel prices will have a
serious impact on the economy, on the poor and on middle class
consumers," Lotfi Khaldi, head of the Tunisian consumer advocacy
group, told a news conference last week.
"The decision is a response to conditions of the
International Monetary Fund."
Concern about the public reaction to a deal with the IMF
could conceivably cause the government to delay signing an
agreement, as has happened in Egypt.
Moez Joudi, a private economist who divides his time between
Tunis and Paris, said Tunisia needed an IMF deal because it
would have trouble borrowing from the markets after downgrades
of its credit rating.
But he said the government should avoid imprudent steps that
would hurt the middle class, who were needed to revitalise the
economy. It should look at steps such as cracking down on
smuggling and tax evasion, creating a more equitable tax system
and making public spending more efficient, he argued.
(Editing by Andrew Torchia)