Summary:

On 14 February 2023, a senior World Bank official stated that Tunisia and Lebanon remain the two most concerning economies in the Middle East and North Africa (MENA) region. The statements, made by World Bank Vice President for MENA Ferid Belhaj, were made on the sidelines of the World Government Summit in Dubai. Belhaj cited large state debts and rising inflation as the key concerns. He further noted the persistent risk posed by large state-owned enterprises, remarking on the tendency for state debt sitting in public enterprises to go unaccounted for in public accounting.

Regarding Tunisia specifically, Belhaj highlighted the need for reform and some progress that has been made, but expressed concern at the pace of economic reform as the country continues to struggle through an economic crisis. Comments from the World Bank come as the International Monetary Fund (IMF) loan approval process continues to be delayed, having been previously scheduled for late December 2022. Despite the delays, recent statements from IMF leadership indicated that a decision point could be nearing, at which Tunisia’s loan application could be formally reviewed by the IMF board.

Outlook:  

The challenges posed by the size of Tunisia’s public sector are well known and have long concerned economists. Any effort to reform this sector, however, remains at the core of Tunisia’s ongoing economic and political challenges as the country’s powerful labor unions face off with the administration. The disclosure of planned reforms on the horizon will undoubtedly draw push-back from the unions that have committed to playing spoiler in substantive reform efforts targeting the public sector. A significant risk of civil unrest and economic disruption remains as the country navigates these key points of disagreement between its most powerful parties.

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