Tunisian government resists proposed IMF austerity programme 

19 July 2023

Amid fears of an economic collapse, the Tunisian government is attempting to renegotiate an IMF loan to avoid cutting subsidies on food and fuel required by the IMF that would hurt the poor and economically marginalised. The country is suffering from severe shortages of basic goods and is heavily dependent on imported wheat supplies, which have been disrupted by the war in Ukraine, and is exhausting its foreign currency reserves.

The IMF deal would provide $1.9 billion and unlock a further €1 billion from the EU, including €105 million to stop African migrants from going to Europe. European leaders are facilitating talks between Tunisia and the IMF mainly out of concern that an economic collapse in the country could result in an increased number of migrants crossing the Mediterranean to Europe.

The IMF programme demands the Tunisian government phase out subsidies for food and fuel, replacing them with targeted support as part of its ‘social spending floors’ policy aimed at mitigating the impact of its austerity policies on the poorest.

Middle East/North Africa-based civil society network Euromed Rights argued that this approach is fundamentally misguided, as social protection is a human right, not a form of mitigation. Further, a recent Oxfam study of 17 of these spending floors found they were “opaque and inconsistent” and provided a “fig leaf” for damaging austerity.

A 2022 study by Friedrich Ebert Stiftung found food subsidies in Tunisia are progressive and equitable, and effective in eradicating poverty. The last time Tunisia removed subsidies at the IMF’s insistence, in 1983, widespread rioting and unrest followed, leaving at least 80 dead in a brutal government crackdown (see Observer Autumn 2019; Briefing, IMF policy in the MENA region: Lessons unlearnt).