Tunisia has signed a $1.2 billion loan agreement with the Islamic Development Bank to finance the country’s energy imports over a period of three years, according to the Ministry of Economy on Monday.
The agreement was signed on Sunday on the sidelines of the annual meetings of the Islamic Development Bank Group held in Riyadh from April 27 to 30.
Tunisia has been facing difficulties in providing some essential goods for months amid a financial crisis.
The Ministry of Economy stated in a press release that Minister of Economy and Planning Ferial Borgi Al-Seba’i signed a new framework agreement for cooperation for the next three years worth $1.2 billion (approximately 3.78 billion dinars) with Hani Salem Sonbol, the CEO of the Islamic Corporation for the Development of the Private Sector (ICD), to “allocate the loan to finance the imports of some public companies for essential materials such as crude oil and petroleum products.”
Most of the government-owned companies in Tunisia are facing structural and financial crises, with most of them, about a hundred companies, recording financial losses for years.
Among the major companies that have not fully recovered their production activity since 2011 is “Phosphates Gafsa,” which ranked among the top in the world in extracting and processing this material and represented an important source of hard currency for the state budget.
Last year, Tunisian President Kais Saied rejected a preliminary agreement with the International Monetary Fund (IMF) to obtain a new loan of $2 billion, considering the reforms recommended by the IMF, such as restructuring government-owned companies and gradually lifting subsidies on some essential products, as “impositions.”
Tunisia, with a population of 12 million, has been experiencing inflation rates for two years (an average of 10% annually) with food prices sometimes tripling, leading to deteriorating conditions for the working and middle classes.
Economic growth in 2023 was around 0.4%, affected by a continuous drought for the past five years. The ratio of domestic and external debt to GDP is approximately 80%.
In early February of last year, the Tunisian Parliament approved an amendment allowing the Central Bank to provide financial facilities to the General Treasury, in an “exceptional” step according to the government, but its potential repercussions on inflation and the value of the dinar raise concerns among experts.
