19 October 2018 1340 Views

On January 9, 2018, demonstrations opposing the new austerity measuresenacted by the 2018 Budget Lawbroke out in a number of Tunisian cities, namely against the alleged price increases in basic commodities. The Ministry of Finance issued a statement that listed all goods which were not part of the increase including milk, bread, sugar and oil. The protests ensued following the statements released by some political party officials, including that of Popular Front leader MonjiRahwi, who sought to flout the Act by condemning the national set budget for 2108 and by claiming an increase in price of basic commodities.

Certain political parties that were under Popular Front's wing urged people to go out to the streets and protest against the supposed increments. Several student unions and social coordinators took action, revealing at a press conference that was organized by the Tunisian Forum for Economic and Social Rights '(Yasaar) ''Left'', their strong ties with the Tunisian Human Rights League (LTDH), the Tunisian General Labor Union UGTT and the General Tunisian Union of Students (UGTE). The violent protests were accompanied by vandalism, looting and theft, which worse yet were justified by some Popular Front parliamentarians whereas other MP's reprehended. 

Grounds for the 2018 Budget Law

"We have been going around in circles for seven years. The country is experiencing significant deficits in trade and budget, what induced inflation, deepened debts and ailed the Tunisian Dinar.'' Minister of Finance RaidhaShalghoum said in a reference to the new austerity measures, ''the government plans to reduce the budget deficit down to 4.9% in 2018 and down to 3% by 2020, so that we achieve economic balance and stability. We are obligated to increase taxes to ensure backup resources in public coffers. That being said, the added tax will not be imposed on subsidized commodities and will be distributed over various commodity groups, and it will not only target SME's but also larger enterprises, thus it will include the upmarket.'' He then added ''the amendments to Budget Law 2018 impose a 1% increase in the VAT (Value Added Tax) of several commodities, medicines for one. There will also be another 1% increase on the customs duty of luxury goods. Moreover, strict controls will be placed on imports, particularly on products of Turkish origin by subjecting them to a higher customs duty.''

The minister also shed light upon the new price support measures ''the government has allocated 3520 million Dinars to support various commodities, which will be distributed as follows: 1570 million will be disbursed to support primary commodities, 1,500 million will go towards fuels and crude oil, 450 million for public transport and 100 million for sugar, water and electricity.'' Furthermore, the government will provide further market price support which will benefit the consumer, for instance ''the meat industry will be supplied with 2300 tonnes of red meat which will be sold at a controlled price: 17 Dinars per Kilogram. And concerning the rising housing market rates, a 13% VAT increase will be introduced, of which only 3% will have an impact on real estate prices. The state is running a deficit, similarly to many other countries, Turkey for example is running a deficit of 1850 million Dinars. It is also worth mentioning that the Higher Export and Investment Council (CSEI) recently held a meeting that was overseen by the Prime Minister, the meeting unveiled 20 resolutions aimed at raising the country's exports to 50 billion Dinars by 2020.''


The economic crisis in view of the IMF

A recent report by the IMF titled ''Public Wage Bills in the Middle East and Central Asia'' confirms that a strong growth in public employment, hence a rise in employee costs, has been accompanied by a decline in productivity of around 10% between 2010 and 2015 due to the recruitment of low-skilled workers. The report which inspects Tunisia's risingwage bill spending in the public sector indicates that such conditions have adverse implications on the private sector, seeing that higher education graduates often opt for public employment rather than the private sector. ''Tunisian graduates tend to continue to prefer a career in the civil service over a job in the private sector. The resulting high reservation wages tend to slow entrepreneurial initiative, dent overall competitiveness, and contribute to the slow pace of job creation in the private sector.''

The report also explains that the upsurge in pay since 2011 was one of the main causes of Tunisia's financial crisis. Tunisia's public service pay bill has risen to 14.1% of GDP by 2016, in contrast with 10% in 2010. Today, wage spending represents 14.4 per cent of GDP, accounting for about two-thirds of fiscal revenues and about half of total government expenditure.




The crisis' repercussions

Spokesman of the Ministry of Interior said that rioting has diminished across the country last night. 328 people have been arrested on vandalism charges since the riots began, apart from another 32 who are currently under investigation. The detentions were warranted by the Public Persecutions Department. The protests transcend the price increases to more fundamental causes, being that youth participation in politics does not surpass 2.7%, their attendance in political party meetings is only 2.2%, not to mention that young candidates represent less than 3% of party lists. On the other hand, figures show that 70% of unemployment are below the age of 30.

The future is looking bleak if the situation keeps deteriorating in light of the escalating poverty rates. Year 2015 witnessed 4960 protests, while 9532 protests were reported in 2016 and 10223 in 2017. Not to mention that around 100 000 students annually dropout of schoolsout of 116 000 dropouts in 2016, 56 000 expressed their desire to migrate. 7988 youth were able to reach Italian coasts last year through clandestine migration. Statistics from specialized centers show that 33% of young people aged 15-29the highest in the regionare neither in education, labor nor in training. More than 54 per cent of Tunisian youth, according to some estimates, are contemplating to leave the country, of whom more than 31% are prepared for illegal migration.



To break out of the crisis and avoid further pitfalls, a series of short, medium and long term measures have been recommended by a number of leading pundits:

1 - Introducing salary cuts to senior state officials in the same manner Croatia's President has done.

2 - Withholding privileges to senior officials during 2018,subject to further extension.

3 - Minimizing the number of government owned vehicles and ceasing all non-compulsory imports, thereby mitigating fiscal strains.

4 - Initiating a government plan of action to recover financial assets, namely debt capital from major businesses and hotels, within a three-month period through any viable means i.e. seizure, confiscation and freezing assets.

5 - Fully exempting citizens from public healthcare fees, as well as funding 50% of private treatment costs.

6 - Suspending all external debt payments in 2018 through an agreement with the creditors, given that outstanding repayments are not deferred to 2019 in order to prevent a cost-overrun on next year's budget.

7 - Providing new workers with jobs in the private sector in concordance with the requirements of each association.

8 - Launching an employment scheme that includes vocational training for graduate job-seekers in year of graduation order.

9 - Privatizing public organizations which are struggling with deficits granted that their staff remain employed, in addition to recruiting more workers.

10 - Adhering to the deadline of municipal elections on May 6, and to that of the presidential elections in 2019 within a framework of transparency, freedom of expression, and peaceful, democratic competitiveness that is free from tension and antagonism.


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