Econostrum | Economic News in the Mediterranean

Algeria signs $300m cheque to help Tunisia

Written by Frédéric Dubessy on Thursday, December 16th 2021 à 15:40 | Read 787 times

Algeria comes to the rescue of Tunisia in great financial difficulty (photo: Algerian Presidency)
Algeria comes to the rescue of Tunisia in great financial difficulty (photo: Algerian Presidency)
TUNISIA / ALGERIA. On an official visit to Tunis on 15 and 16 December 2021, Abdelmadjid Tebboune did not come empty-handed. The Algerian president granted a $300m (€265m) loan agreement to his counterpart Kaïs Saïed to help Tunisia face its budget crisis. More precisely, the cheque had already been signed on 9 December 2021 by Ayman Ben Abderrahmane, Algerian Prime Minister and also Finance Minister, who had preceded his head of state to Tunisia. Abdelmadjid Tebboune has therefore only made this loan official.

Algiers had already made, in February 2021, a deposit of $150 million (€132 million) as a guarantee to the Central Bank of Tunisia (BCT) and allowed its neighbour to benefit from payment facilities on gas and hydrocarbon supplies.

This additional sum of $300m will provide some oxygen to a Tunisia that is struggling with a debt of $41bn (€36.2bn) representing 102% of its Gross Domestic Product (87.63% of GDP at the end of 2020) and an inflation rate forecast by the International Monetary Fund (IMF) at 5.97% at the end of 2021 (6.36% at the end of 2022). Moreover, the country is in the midst of political uncertainty with a pause in the path to democracy since the end of July 2021, confirmed by its omnipotent head of state just a few hours ago. This does not help attract investment and financial support. Tunisia is in dire need of such support as it is affected by the Covid-19 health crisis and its consequences on its economy. In particular on its tourist revenues, a vital sector now at a standstill with the closure of borders and the suspension of air and sea links because of the pandemic.

Tunisia in the Top 10 of the most indebted African countries

Importing many products, particularly high value-added products (high-tech equipment, energy, motor vehicles used for transport, etc.), but exporting only low value-added products (olive oil, textiles, phosphate), Tunisia has a trade balance deficit and its coffers are emptying. In 2019, exports reached $19.2bn ($15bn for goods and $4.2bn for services) against imports amounting to $23.4bn ($20.4bn for goods and $3bn for services).

According to a report published at the end of October 2021 by the Centre d'Étude et de Réflexion sur le Monde Francophone (CERMF), Tunisia has made "a remarkable and historic entry", with a ninth place (between Egypt and the Republic of Congo) in the Top 10 most indebted countries on the African continent. "Once considered a model of economic and social development for the whole of Africa and the Arab world, despite certain shortcomings, sometimes exaggerated, Tunisia has indeed experienced a lost decade by recording an annual economic growth of only 0.7% on average over the ten-year period 2011-2020," analyses the CERMF.

The country is still waiting for a $4bn loan from the International Monetary Fund (IMF). And, after receiving European funds, Kaïs Saïed is courting the World Bank, the African Development Bank as well as the United Arab Emirates and Saudi Arabia.

​27 agreements and memorandums of understanding signed

Algeria and Tunisia intend to expand the "areas of cooperation" to reach "a qualitative level that embodies the full harmony and common will of the leaders and peoples of the two countries," said a statement from the Algerian presidency. The objective would be to multiply the volume of exchanges. Today they only reach $1.2 billion (€1.06 billion). According to the same text, this visit aims to "strengthen the deeply rooted fraternal relations between the two brotherly peoples".

The two presidents did not only talk about money. They also discussed their common neighbour, Libya, and the infiltration of jihadist groups from that country. The heads of state also initialled twenty-seven agreements and memoranda of understanding. They cover industry, SMEs, environment, foreign trade, fisheries, employment, energy, media, justice, communication, decentralisation, public institutions, culture, religious affairs, vocational training, women and children, the elderly, youth, sports, education and health.

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