Tunisia must bridge a budgetary gap estimated at nearly 9 billion dinars before the end of the year, said International Finance Corporation (IFC) Resident Representative Georges Ghorra, adding that this is an official figure provided by the Finance Ministry.
Speaking at a webinar organised on Thursday evening by the “Association des Tunisiens des Grandes Ecoles” (ATUGE) on the theme: Money creation: Do we have any other choice in the immediate future?, Ghorra estimated that this budget deficit is likely to increase further in view of the rise in oil and grain prices.
When asked about the measures to be taken to bridge this gap, the official pointed out that “international donors are eager to help Tunisia, but this support requires a credible partnership.”
“The International Monetary Fund (IMF) is now demanding a credible reform plan that can be agreed upon by the Tunisian General labour Union (UGTT) and the Tunisian Confederation of Industry, Trade and Handicrafts (UTICA),” stressing that “it is important that the latter are stakeholders in this agreement to avoid the mistakes of the past.”
“Tunisia signed financing agreements with the IMF and just a few weeks later, recruited three thousand people in the public sector,” he argued, pointing out that “the IMF is waiting for more assurance from the next government.”
To close the 2021 budget, Georges Ghorra said that Tunisia should ask for help from “friendly countries.”
Safouane Ben Aissa, an academic and economist, agreed with Ghorra that Tunisia should seek financial assistance from “friendly countries” such as Saudi Arabia as part of the Special Drawing Rights (SDR).
The SDR is an international reserve asset held by the IMF and used by member countries to supplement their own reserves.
The economist considered that this mechanism offers the possibility for rich countries to reallocate their SDRs for the benefit of poor and indebted countries.
He estimated that this mechanism could be an alternative to “money printing,” adding that any direct or indirect money creation will only further amplify the inflation rate currently estimated at 5.7%.
Money printing is a “flight to safety”
Economist and former administrator of the Central Bank of Tunisia (BCT) Moez Laabidi considered for his part, that “money printing” is “a coward’s choice” in the political sense of the term, underlining that this “flight-to-safety policy” is likely to worsen inflation and lead to a downgrading of Tunisia’s sovereign rating.
If direct monetary financing of the budget deficit, which exceeds 4% of GDP, is carried out by the Central Bank, Tunisia may become an “unattractive” country on the international markets, he warned.
Instead of resorting to printing money, he said, it would be wiser to fight the cash economy and the informal economy.
It is also necessary, he added, to develop the renewable energy sector in order to cut the energy bill.
The former BCT administrator also emphasised the need to impose governance standards in public enterprises, saying that the state budget is no longer able to support poor governance in these institutions.
He argued that bilateral negotiations with the IMF remain an avenue to be explored, but that this remains inherent to a “credible” reform plan.
The next government is called upon to seriously engage in a dynamic of “convincing” reforms to relaunch negotiations with the IMF, he concluded.
Source: TAP New Agency