Tunisia in a “complicated” situation after the suspension of its partnership with the World Bank

The World Bank decided on Monday, March 6, to suspend its partnership framework with Tunisia after an increase in abuses against sub-Saharan migrants following an inflammatory speech by President Kaïs Saïed on illegal immigration. This suspension ” until further notice “ of the partnership program means de facto a freeze on all new financing to Tunisia, already mired in a serious financial crisis.

World Bank management has decided to ” pause “ this partnership agreement and “remove the board review from the calendar”originally scheduled for March 21 and “postponed until further notice”. This decision concerns the Country Partnership Framework (CPF), which serves as a basis for monitoring by the World Bank’s Board of Directors in order to assess and support the country in its aid programs.

The institution cannot launch new support programs with the country until the board of directors has met, even if “Funded projects remain funded and ongoing projects are maintained”, as a source close to the World Bank said. An official at the institution, speaking on condition of anonymity, told AFP the move meant that granting any new funding to Tunisia was unlikely. “before the situation becomes clearer” and that a new CPF is concluded.

Low growth, high inflation and high unemployment

Even temporary, such a freeze “risks having a very bad impact on Tunisia’s financial situation”says economist Ezzeddine Saidane.

The country, indebted to the tune of 80% of its GDP due in particular to the weight of its public service, must resort to borrowing to make up its budget deficit. He is also negotiating a loan of nearly 2 billion dollars (1.9 billion euros) with the International Monetary Fund (IMF), which conditions other international aid (including that of the European Union), but the talks are slipping.

“The budget for the year 2023 is based on loans of 25 billion dinars (7.5 billion euros), including the equivalent of 5 billion dinars from abroad. Without the World Bank, carrying out such an operation would be very complicated”Judge M. Saidane.

Governor of the Central Bank of Tunisia, Marouane Abassi, warned in January that the year 2023 would be “complicated”, in a context of low growth (less than 3%), high inflation (over 10%) and high unemployment (over 15%), without a quick agreement with the IMF for a loan. But negotiations between the two parties seem to have stalled since an agreement in principle announced in mid-October.

“The rest will depend on the reaction of the government”

A possible agreement with the IMF also depends on certain financing to be released by the World Bank, whose decision to suspend the partnership program with Tunisia could in this respect constitute a new setback in the negotiations. “The IMF may be hesitant to finalize a deal that was already controversial now that the other major donor is stepping back”said the official of the World Bank speaking on condition of anonymity.

The Tunisian government has still not reacted to the World Bank’s decision. For Mr. Saidane, the Tunisian authorities should “find a way to turn the page on this affair and regain the confidence of the international financial institutions”. “The rest will depend on the reaction of the government”he adds.

In the meantime, talks between Tunisia and the World Bank for new funding – including a 20 million euro loan for a cable project to supply Europe with solar energy – have been postponed until further notice. “The longer the situation persists, the more Tunisia will lose funds”warns the official of the World Bank.