Summary:

On 15 September 2022, the Tunisia government reached an agreement with the country’s influential labor unions to raise public sector wages as well as the country’s minimum wage. The agreement comes following multiple weeks of negotiations that, at times, appeared to be stalled. The agreement indicates that the minimum wage will be raised by 7% and all public sector employees will receive a 3.5% wage increase, which the unions have argued is necessary given the rapidly rising cost of living. Adding to the pressure of the negotiations is Tunisia’s ongoing application for a loan from the International Monetary Fund (IMF), the receipt of which will almost certainly be contingent upon cost cuts and reforms in the public sector.

Outlook:  

Both the unions and the government of Tunisian President Kais Saied were motivated to reach a deal – the unions seeking to secure gains as austere recommendations from the IMF loom in the future, and Saied as he seeks to ensure that the IMF loan remains an option as other potential funding sources for a bailout of the economy remain hard to find. The wage increases will placate concerns from Tunisia’s vast population of public employees, but may only temporarily restrain the impacts of food and fuel shortages.  Creditors and suppliers may grow increasingly wary of Tunisia as an economic partner, particularly given the perceived instability of the government in an economy that has long been propped up by government subsidies and intervention in many sectors.