Reform or face further unrest – IMF warns Tunisia

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Man waving a loaf of bread during a protest in Tunis. Photo – Talel Nacer

The state of Tunisia’s economy has come under renewed questions after the International Monetary Fund released a damning report in which it expressed its concerns over the internal tensions within the country in the wake of the 2011 uprisings that toppled the government of Zine el-abidine Ben Ali.

The IMF report said Tunisia’s weak economy is having a severe impact on the country’s financial wellbeing. It urged the central bank to implement reforms targeting the country’s failing banking sector in a bid to increase loan provisions and kickstart the economy.

The Paris-based monetary agency also urged the central bank regulators to develop crisis-management arrangements for struggling banks and review its exposure to these organisations by winding back its liquidity support.

“The current circumstances provide an opportunity to revisit the rationale for and the modes of state intervention,” the report said. “Public banks have been used to support non-viable state-owned enterprises and activities, their governance arrangements have been weak, and they have been staffed mainly with civil servants with no banking experience. In addition to addressing these issues, the major state-owned banks should be subject to in-depth audits by international firms, including assessments of their viability if significant recapitalisation needs are identified.”

The IMF findings argued that a “comprehensive capital market reform is needed to support long-term investment”.

“The Capital Market Authority needs to strengthen its oversight of investment markets. A reliable yield curve should be developed, and the confiscated assets of the old regime could be sold to jumpstart markets.”

The agency said it is preparing a multi-year technical assistance (TA) programme, “aimed mainly at strengthening banking supervision”.

The fund’s report has been published at a time of renewed tensions in Tunisia, which is the birthplace of Arab uprisings that have toppled four national governments in the Middle East and North Africa since January 2011.

Last week, Tunisian police clashed with protesters in the town of Sidi Bouzid; the site of Mohamed Bouazizi’s self-immolation in December 2010. Bouazizi’s act, which was in protest to the treatment he was subjected to by local law enforcement officials, proved the catalyst for the Tunisian revolution.

Police fired tear gas and rubber bullets into the crowd, which was protesting against the government’s perceived failure to provide employment growth. The country’s jobless rate topped 18% in the first quarter of this year.

Many critics of the Islamist Ennahda-led government, elected to power in October 2011, say it is rife with corruption and bent on nullifying free speech.

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