The International Monetary Fund signaled it was close to completing a financial arrangement that should allow Tunisia to secure a $1.9 billion rescue package.
(Bloomberg) — The International Monetary Fund signaled it was close to completing a financial arrangement that should allow Tunisia to secure a $1.9 billion rescue package.
“We needed to ensure that there is enough financing for the program,” Jihad Azour, the IMF’s director for the Middle East, North Africa and Central Asia, said in an interview on Tuesday. “The good news is we are almost there.”
Though Tunisia reached a staff-level agreement with the IMF in October, the deal has yet to be reviewed for approval by the fund’s directors. A breakthrough hinges on additional support from Tunisia’s allies and the implementation of measures by the government that are required to access funds.
Tunisia’s dollar bond due 2025 rose more than 4 cents to around 54.7 cents on the dollar as of 6 p.m. in London, the biggest gain across emerging markets on the day.
“We have worked with the authorities and with the friends of Tunisia to mobilize additional financing assurances and the authorities have been progressing on what we call the prior actions,” Azour said. “There are still a few things to be finalized.”
Talks with the IMF have continued even after President Kais Saied vowed to reject any deal involving spending cuts. The fund even praised Tunisia last month for what it called “initial progress” in enacting home-grown economic reforms.
As negotiations drag on, the IMF is turning less optimistic on the cash-strapped country’s prospects. The fund’s latest outlook showed it expects a slower expansion in the economy than it had forecast in October, with inflation on track to pick up more than anticipated.
Tunisian bonds plunged last month after Saied expressed his opposition to what he called foreign “diktats” that could further impoverish the country. The prospect of extensive spending cuts, including for the nation’s sprawling public sector, has sparked regular criticism and threats of strike action from Tunisia’s largest trade union.
“Of course there is a real concern about making sure that some of the measures will have the right distributional impact and we are also very much concerned about that,” Azour said. “We want to make sure that social spending is more targeted and we believe that the reform of the subsidy on energy will achieve that.”
–With assistance from Netty Ismail.
(Updates prices in fourth paragraph.)
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