Tunisia’s bread subsidy battle does not bode well for IMF deal, RANE/Stratfor says

Tunisia’s bread subsidy battle does not bode well for IMF deal, RANE/Stratfor says
A traditional Tunisian bakery in Hergla preparing fresh bread / Wikipedia / Faiza affes
By bne IntelliNews August 30, 2023

Tunisia’s battle to mitigate widespread bread shortages “risks eroding its authoritarian president’s popularity, triggering social unrest, and delaying the disbursement of needed funds from the International Monetary Fund (IMF)”, RANE/Stratfor writes in a new analysis.

In early August, European-style bakeries selling baguettes in the former French colony had been prevented from accessing their quota of subsidised flour, after President Kais Saied said there should be “one type of bread for all Tunisians”.

Shortly after, those same bakeries also stopped receiving non-subsidised flour and semolina from the state, which controls the supply of all such essential goods in the country. Around 200 bakers in the capital, Tunis, held a sit-in to protest the move.

On August 19, the Tunisian government announced that it would resupply flour to private bakeries after withholding supplies for two weeks, in an attempt to ease a strike complicating the ongoing bread shortage in the North African country.

The announcement came several days after authorities arrested the bakeries’ union head Mohamed Bouanane on August 16 for alleged “monopoly and speculation with subsidized foodstuffs,” in an apparent effort to use him as a scapegoat for the widespread bread shortages in the country.

On August 1, Saied also fired Prime Minister Najla Bouden and replaced her with Ahmed Hachani, a former central bank executive.

“While the presidential office gave no official reason for the shake-up, observers widely suspect the move was similarly aimed at deflecting criticism against the government's failure to ease the country's economic crisis by using Bouden as a scapegoat,” RANE/Stratfor writes.

“The decision to backtrack on the controversial flour decision confirms how hard it will be for Tunisia’s government to implement IMF-requested austerity measures, which could delay the disbursement of funds and result in a protracted economic crisis.”

In October 2022, the IMF agreed to supply Tunisia with a $1.9bn loan to be disbursed in tranches over 48 months. The agreement is widely seen as key to shoring up the country's failing economy and improving investor confidence in Tunisian debt.

But in March, Saied publicly rejected the wide-ranging economic reforms required by the IMF. Subsidies on basic goods are a highly sensitive political issue in Tunisia, which has experienced repeated shortages of subsidised flour, sugar and other basic goods this year. In June, the country’s central bank governor said Tunis was trying to thread the needle between strict austerity measures requested by the IMF and pursuing a softer range of reforms that take into account vulnerable groups and do not require cutting subsidies.

“Saied’s government will do whatever it can to avoid disrupting the price of bread and other basic goods. But without a path forward on the staff-level IMF agreement or some other major financial loan or grant, Tunis is unlikely to be able to quell the current economic crisis, which will raise the risk of more strikes and social unrest as Tunisians become increasingly desperate,” RANE/Stratfor writes.