Summary:

This week, the Tunisian government released a report on the progress toward execution of the 2023 budget which revealed a nearly 40% increase in expenditures on subsidies compared to the first half of 2022.

Much of the increase in subsidy spending is attributed to a 60% increase in expenditures for fuel. Approximately 1.34 million dinars of this spending went to Societe Tunisienne des Industries de Raffinage (STIR) which is responsible for refining and to STEG, which handles the country’s power distribution.

In the first half of 2023, fuel subsidies accounted for 77% of all subsidies paid by the Tunisian government.

Meanwhile, trade data from July revealed that the trade deficit tripled. This dramatic increase was driven by a 132% increase in energy imports. Additionally, a 43% drop in the export of mining and phosphate products contributed to the widening trade deficit.

Imports excluding energy imports rose by just under 2% in July.

Outlook:  

Subsidies remain a controversial subject within the Tunisian economy, with many fearing that changes could result in unrest.

President Kais Saied expressed a commitment to maintaining subsidies, even as the financially cumbersome system has been widely identified as a core weakness in Tunisia’s economic system.

In the short-term, subsidies are unlikely to be changed, particularly as the government does not appear to be actively pursuing the $2 billion International Monetary Fund (IMF) loan deal that would have come laden with requirements to address the subsidy system.

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