Tunisia returns 60m Euro of Aid from the European Union

In a surprising move, Tunisia has announced that it will return 60 million Euro of aid that it received from the European Union in 2019. The decision comes amid growing tensions between the North African country and the bloc over human rights and migration issues.

Tunisia is one of the main transit countries for migrants and refugees trying to reach Europe via the Mediterranean Sea. The EU has been providing financial and technical assistance to Tunisia to help it manage its borders, improve its asylum system, and prevent irregular migration. However, some critics have accused the EU of outsourcing its migration policy to Tunisia and other third countries, without ensuring adequate protection for the rights and dignity of the people on the move.

The Tunisian government said that it decided to return the aid money because it did not want to be seen as a “subcontractor” of the EU, and because it wanted to preserve its sovereignty and independence. The government also said that it was disappointed by the lack of solidarity and cooperation from the EU, especially after the political and economic crisis that followed the attempted assassination of President Kais Saied in July 2023.

The statement also expressed Tunisia’s gratitude for the EU’s support and partnership over the years and affirmed its willingness to continue cooperating with the EU on various issues of mutual interest. The statement added that Tunisia hopes to resume its dialogue with the EU once the situation stabilizes and a new government is formed.

The EU expressed its regret over Tunisia’s decision and said that it remained committed to supporting the country’s democratic transition and development. The EU also said that it hoped to resume a constructive dialogue with Tunisia on all areas of mutual interest, including migration and human rights.

The return of the aid money is likely to have a negative impact on Tunisia’s economy, which is already struggling with high unemployment, inflation, and debt. It may also affect the country’s relations with other international donors and partners, who may question its credibility and stability. Moreover, it could jeopardize the prospects of a new EU-Tunisia Association Agreement, which was supposed to be finalized by the end of 2023.

Some analysts have suggested that Tunisia’s decision to return the aid is a sign of its rejection of any external interference or pressure on its internal affairs, especially after some European officials and lawmakers criticized President Saied’s actions as a coup d’état and called for sanctions against Tunisia. Others have argued that Tunisia is trying to assert its autonomy and dignity in the face of the EU’s conditionalities and expectations, which are often perceived as intrusive and paternalistic by some segments of the Tunisian society.

Tunisia is facing a political and economic crisis that has been exacerbated by the COVID-19 pandemic and social unrest. The country, which is widely regarded as the only success story of the 2011 Arab Spring uprisings, has been struggling to secure foreign financing and implement reforms to revive its stagnant economy.

One of the main sources of external funding for Tunisia is the International Monetary Fund (IMF), which agreed in principle to provide a $1.9 billion loan last year. However, the loan has been delayed due to disagreements over the conditions attached to it, such as reducing public spending, cutting subsidies, and increasing taxes.

The IMF deal has also been a source of contention between Tunisia’s President Kais Saied and his Economy and Planning Minister Samir Saied, who are not related. The president, who seized sweeping powers from parliament in July, has repeatedly expressed his opposition to the IMF’s demands, calling them “foreign diktats” that would impoverish Tunisians and spark protests. He has also hinted that he would not seek parliamentary approval for the loan, which is required by the constitution.

The minister, on the other hand, has been a vocal advocate of the IMF deal, arguing that it is essential for restoring financial stability, attracting investors, and repaying debts. He has also warned that Tunisia faces a risk of default if it fails to secure the loan. He represented Tunisia at the annual meetings of the IMF and World Bank in Marrakech, Morocco, last week, where he reportedly discussed the progress of the negotiations with the IMF officials.

On Tuesday, October 18, President Saied decided to dismiss Minister Saied from his position, without giving any official reason. He assigned Finance Minister Sihem Boughdiri to temporarily run the economy ministry. The move came as a surprise to many observers, who saw it as a sign of escalating tensions between the president and his cabinet over the economic policy direction.

The dismissal of Minister Saied has raised concerns about the future of Tunisia’s relations with the IMF and other international donors, who have been waiting for clarity on the country’s reform agenda and political situation. Some analysts fear that the president’s decision could jeopardize the chances of reaching an agreement with the IMF before the end of the year, which could have serious consequences for Tunisia’s economy and social stability.

Others, however, hope that the president’s move could pave the way for a more constructive dialogue with the IMF and other stakeholders, based on Tunisia’s own capabilities and priorities. They argue that the president may have a different vision for addressing Tunisia’s economic challenges than his former minister, one that is more responsive to the needs and aspirations of the Tunisian people.

Tunisia’s budget bill for 2024, which was unveiled on Tuesday, reflects some of these differences. The bill proposes to maintain subsidies for fuel, electricity, and food, which are seen as vital for easing social pressures and protecting vulnerable groups. It also plans to increase taxes for banks, hotels, and liquor companies, which are perceived as profiting from the crisis. The bill does not mention any agreement with the IMF, or any specific reforms related to it.

Tunisia’s economy is expected to grow by 2.1% in 2024, after a modest recovery of 0.9% in 2023. The government aims to reduce its public wage bill from 14.4% of GDP in 2023 to 13.5% in 2024, and its fiscal deficit from 7.7% in 2023 to 6.6% in 2024. However, these targets depend largely on securing external financing and implementing structural reforms.

Tunisia’s economic future remains uncertain and challenging amid a complex political transition and a fragile social context. The dismissal of Minister Saied may have opened a new chapter in Tunisia’s economic policy debate, but it also poses new questions and risks for its economic outlook.