Previous Quarterly Editions
Expropriation Risk: 62 62 63 64 ►Political Violence Risk:67 60 58 57 ►Terrorism Risk:53 51 51 51 ►Exchange Transfer and Trade Sanction Risk: 55 54 55 54 ►Sovereign Default Risk:75 83 83 83 ►
TREND ►
Protest intensity in 2022 and Q1 2023* 2022 Q1 2023Cost of living : Medium MediumAll protest: Medium Medium
Cost-of-living protest risk in 2023*Wage protest: HighFood/fuel policy protests: High
*Note: Protest intensity is calculated based on ACLED. Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of calculations, see the introductory essay.
The surge in global commodities prices over the last year has put additional pressure on Tunisia’s already strained state budget, which continues to subsidize basic foodstuffs and fuel, although the government has slowly rolled back some of these subsidies in recent years. The government has been forced to delay or cut back on imports of cereals and other staples, leading to widespread shortages, and rationing of certain products.
Meanwhile, the price of non-subsidized goods has increased dramatically over the last year. Government figures in February 2023 showed consumer prices had increased by 10.4% year-on-year; the rate of inflation was higher still for food and non-alcoholic beverages, standing at 15.6%.However, Tunisians’ ability to express dissatisfaction at the ballot box has been severely curtailed by reforms since President Kais Saied seized almost total power in a constitutional coup in July 2021.
Following a scarcely credible referendum on amendments to the constitution proposed by Saied, parliamentary elections held in December 2022 and January 2023 saw political parties effectively
prohibited from participating. Most opposition groups boycotted the polls in any case, decrying them as a sham. The official turnout was just 11%, and the resulting legislature’s powers are extremely limited.
While popular discontent over the state of the economy appears to be high, protests against the government’s handling of the situation (as well as its democratic backsliding) have not yet presented a serious challenge to Saied’s authority. In part, this is likely a function of widespread disaffection with politics after years of turmoil, but also the security services’ heavy-handed approach to dealing with dissent and an ongoing campaign of arrests and intimidation against nearly all prominent opposition
voices. Nonetheless, there remains a risk public anger could boil over to create a more destabilizing dynamic in the coming months. Indeed, it is likely the government will be forced to lift further subsidies this year, in order to access much-needed financial support and avert a fiscal crisis.
Such a move would be deeply unpopular, and it would provoke a backlash among the country’s trade unions. The latter are now the only major independent body that could still challenge the government’s authority, and they have in recent months expressed increasing criticism of Saied’s policies.
While prominent businesspeople have been targeted as part of the crackdown on all forms of perceived criticism, such pressure has not yet extended to foreign corporations. However, Saied has repeatedly sought to blame some private businesses and speculators for the high levels of inflation and goods shortages, even suggesting that corporations may be part of a conspiracy to destabilise his administration. In this context, instances of administrative harassment are likely to rise, possibly also increasing the risk of expropriation.
Concerns in this area may be compounded by Saied’s ongoing campaign to curtail the independence of the judiciary, by purging and even imprisoning judges perceived as obstructing his agenda while at the same time applying pressure on others to toe the government’s line. Indeed, the President recently stated judges failing to convict those detained on seemingly trumped-up political charges would themselves be considered a threat to state security.
Although protests are currently occurring on a very regular basis, they are mostly small in scale and contained by an extremely heavy police presence. Nonetheless, deteriorating economic conditions combined with the current government’s draconian approach will produce a highly pressurized social environment and ultimately could trigger a much larger wave of popular unrest.
Since the beginning of the year, a more particular risk of political violence has also emerged that threatens Black individuals and communities specifically. This follows a speech by Saied in late February in which he ordered the security services to crack down on illegal African migrants, asserting that “hordes” of Black Africans were coming to the country and threatened to alter its demographic profile. The president further asserted that these individuals were violent criminals and engaged in “unacceptable” social practices.
In the wake of Saied’s speech, African migrants in the country reported a marked uptick in harassment by the authorities as well as multiple incidents of racist violence. The governments of Guinea and Ivory Coast have been repatriating citizens from Tunisia in response, while other Black residents have indicated that they are fearful to leave their homes.
Since religious extremists killed dozens of foreign tourists in two mass-shooting incidents in 2015, the terrorism risk landscape has improved dramatically. There have been no fatal attacks since the bombing of a National Guard bus in September 2020. Only a handful of minor incidents have taken place since that time, usually involving a lone attacker wielding a knife, and they have been quickly contained.
However, small terrorist cells are suspected to remain active along the mountainous border with Algeria, and extremist elements may also be able to enter the country along the porous border with Libya to the south.
At the end of January, the government extended the ongoing state of emergency until the end of 2023. The state of emergency had been introduced in response to the 2015 terrorist attacks, although it is now likely being instrumentalised to suppress opposition rather than being indicative of the actual terrorist threat level.
Although the dinar has stabilised against the US dollar following a slump in the first half of 2022, high commodities prices and weak growth continue to put pressure on Tunisia’s foreign exchange position. Indeed, the IMF forecasts the country to run a current account deficit equivalent to USD3.7 billion, which is about 8% of GDP, this year.
Against this backdrop, the central bank’s foreign currency reserves have been steadily eroded. In late March, they stood at USD7 billion – equivalent to 95 days’ worth of imports – compared to USD7.4 billion (100 days’ worth) at the end of 2022.
While there has been no discussion of introducing capital controls, the president has repeatedly suggested that it may be necessary to limit unnecessary luxury imports.
Progress has stalled on a staff-level agreement for a USD1.9 billion fund from the IMF, first announced in October 2022. The IMF board had been scheduled to approve the two-year facility in December, but the meeting was postponed without explanation. The fund seemingly held back on signing off on the loan because of delays to reforms on subsidies and public-sector wages.
This situation has been further complicated by Saied's April declaration he would not submit to IMF “diktats”. That statement may have been designed for public consumption rather than an indication of a change in policy (the central bank and finance ministry are still in contact with the IMF), but the President's unpredictability and his weakening of state institutions remain a potential stumbling block to an agreement.
Tunisia is in desperate need of external financing to avert a looming fiscal crisis. The state budget points to a funding shortfall of around USD2.9 billion in 2023, equivalent to 5.5% of GDP (compared with 7.7% last year). The urgency of the situation has prompted both the European Union and U.S. to warn of potential “disastrous” consequences and publicly call on Tunis to engage more closely with the IMF to unlock the promised funding. Italy is reportedly putting pressure on the IMF to disburse the loan even without Saied's consent.
Return to contents Next Chapter
