Tunisia’s Kais Saied Balks at IMF Bailout

Saied has rejected the terms of a $1.9 billion deal with the International Monetary Fund, leaving his country in economic peril and Europe bracing for a wave of migrants

Tunisia’s Kais Saied Balks at IMF Bailout
A produce merchant weighs bananas for customers at the Central Market in Tunis on March 23, 2023. (Fethi Belaid/AFP via Getty Images)

On Thursday morning, Tunisia’s President Kais Saied stood beside the grave of Habib Bourguiba, the country’s independence leader and longtime president, and declared he was rejecting the terms of a $1.9 billion bailout loan from the International Monetary Fund. In the monotone and metered classical Arabic he insists on speaking rather than the Tunisian dialect, Saied told reporters that “the diktats that come from abroad and cause only more impoverishment are rejected.”

While Saied’s disdain for what he deems “foreign interference” in Tunisia’s affairs comes as no surprise, the rejection of the deal, which has been a central issue of political and economic concern for years, sent a shockwave through the country and the international community. Without some form of loan, Tunisia is set to default by mid-August.

As part of the loan agreement, Tunisia would implement painful and unpopular austerity measures, trimming subsidies, cutting bloat in the public sector wage bill and privatizing state enterprises.

That the diktats he rejected were proposed by his own hand-picked prime minister, Najila Bouden, seemed inconsequential to Saied. Bouden, a former geology professor whose comfort with glacial timelines seemed to steady her in the protracted negotiations that have been the core mandate of her office for several years, released the terms of the agreement in October.

“This is a package that they negotiated, that they came up with, and for whatever reason they still have not signed,” U.S. Assistant Secretary of State for Near Eastern Affairs Barbara Leaf said in an interview with Reuters last month.

Still, Saied seems set to go his own way. “We won’t listen to anyone except God and the voice of the people,” he said, echoing a common refrain that casts himself as the vanguard of the Tunisian worker.

But what the Tunisian people want, by and large, is predictability if not prosperity. Price hikes that seem inconsequential — the price of a quart of milk rising by a few cents — compound for families surviving on scant incomes. Shortages of staple goods, like flour, butter, coffee and sugar, have plagued grocery stores and breakfast tables across the country for more than a year. Public sector salaries for workers ranging from civil servants to police officers to schoolteachers — and which are slated to be trimmed in the deal Bouden negotiated — haven’t been paid on time, or at all, since the early days of the pandemic.

“You can’t plan on having enough money to take your family to the park on the weekend, let alone for your future anymore,” one school janitor told me last spring, when I was writing about the public sector salary crisis. His paycheck had arrived late so frequently that he owed his bank more than four months’ salary in overdraft and late fees.

The troubling news that Tunisia’s bond prices tanked after Saied’s speech may have investors spooked, but Tunisians themselves are grappling with a lack of options to hold onto their life savings. The Tunisian dinar is a closed currency, and citizens are not allowed to hold foreign currency accounts or exchange more than a few thousand dollars’ worth of dinars per year.

The consequences of a default would be catastrophic. The country’s 2023 budget, which the Bouden administration passed, only balances on the assumption of the IMF deal going through. Budget allocations for everything from health care to education to sanitation would dry up. Foreign currency reserves, already low, would disappear; without them the government cannot buy subsidized goods or pay public salaries.

The president has offered little in the way of economic alternatives: Shortly after his consolidation of power, he brandished a ream of paper in a press conference he claimed held the names of corrupt business owners from whom he would claw back billions of stolen dinars; while a commission was set up, no progress has been made. The deadline to try to recover the billions of dollars hoarded abroad by the former president Zine El Abidine Ben Ali and his family recently lapsed, as well.

While Tunisia’s decadelong experiment with democracy gave it a special place in the hearts and budgets of major donor nations, Saied’s autocratic turn has tested the limits of their loyalty.

France and the United States, both major donors to Tunisia, have said much of their aid would be conditioned on Tunisia reaching a deal with the IMF. U.S. Secretary of State Antony Blinken told the Senate Appropriations Committee that “the most critical thing they can do on the economic side is actually get an IMF agreement. We’ve been strongly encouraging them to do that because the economy risks falling off the deep end.” China, too, considers the deal crucial for unlocking funding.

If the economy does fall off the deep end, with the dinar tanking, inflation soaring and everyday necessities out of reach, many Tunisians may make the excruciating choice to board small boats en route to Italy as a way of abandoning the sinking ship of their own nation.

Italy, which has absorbed an enormous influx of migrants from Tunisia’s shores in recent months, has pushed for the IMF to disburse the loan before the deal is implemented, warning that failure to do so would result in a wave of potentially 900,000 migrants making the perilous crossing. But its pleas have gone largely unheeded.

Saied has entertained the idea of seeking funding from Arab partners further east, courting a relationship with leaders in the United Arab Emirates and Saudi Arabia. But if Saied is hoping to get a blank check for his autocratic aspirations from similarly minded leaders in the Gulf, he may be disappointed. When Egypt sought similar support during its recent crisis, several Gulf states said they wouldn’t float loans or aid unless the government took reforms seriously.

Saied seemed unbothered by the isolation he was thrusting his country into. Perhaps he is hoping Europe is too scared of Tunisia’s economic collapse to call his bluff. Perhaps he genuinely believes a staunch rejection of neoliberal global policy will liberate the nation he claims to love. “We must count on ourselves,” he said. Increasingly, it seems as though Tunisia may have to do so.

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