Afreximbank’s $500 Million Loan: A Lifeline for Tunisia’s State Budget

A lifeline for Tunisia with the move to immediate execution of the $500 million loan granted by the African Export-Import Bank (Afreximbank) to finance the 2023 state budget. A very significant step for the community international financial institution for Tunisia to avoid non-payment, or even insurmountable difficulties in its imports.

Finance Minister Sihem Nemsia told the Assembly of People’s Representatives (ARP) during the discussion of this loan that “if a default prevents a State from repaying its debt, this means the announcement of the bankruptcy of this country!” The Tunisian Parliament validated this loan with only five abstentions and two oppositions. The people’s delegates thus express their conviction of the inevitable recourse to these external loans to save the country from bankruptcy, pending the resumption of a sustained pace of work allowing the economic rebound, synonymous with growth.

The loan approved by the ARP will be used to finance the State Budget. The minister could not have been more explicit, stating that “Tunisia urgently needs this loan to meet an important deadline in June”, without giving further details. A look at Tunisia’s list of upcoming 2023 maturities reveals a $500 million Eurobond as well as another of $412 million relating to previous IMF loans.

Another 850 million Eurobond will mature in February 2024, out of a total of 2.6 billion dollars next year, putting the public treasury under severe pressure. The Afreximbank loan will be repaid over five years with two years grace and an interest rate of 10.28%, according to the ARP finance committee report. Which rate is favorable if we know that Tunisian bonds on international financial markets (secondary markets) are quoted at 23% over four years.

This means that Tunisia is very badly off in the event of a possible exit on the international financial market. It therefore requires the framework agreement with the IMF as soon as possible, to pave the way for other loans with traditional donors, such as the ADB, the European Development Bank, etc., if it wants to avoid the specter of bankruptcy.

Interrogations

Afreximbank’s loan nevertheless sends two clear signals. On the one hand, the international financial community is not trying to let Tunisia sink. This is a large loan covering almost 25% of the country’s external financing needs in 2023, estimated at nearly two billion dollars, of which 300 million have been covered by Algeria. And if we add the premises of a prosperous tourist year and the rising shipments of Tunisians abroad, approaching three billion dollars in 2022, the Bouden government would not be in immediate pressing need of hard currency to complete 2023.

Moreover, President Saïed and the institutions of his power have not closed the door to traditional international financial institutions. The words of the Minister of Finance to the ARP confirm this. “It would be ideal if we did not resort to foreign loans and managed to rebuild the country with our own resources, fighting monopoly and enshrining the culture of work, but today this will only reduce the indebtedness… We are forced into it,” said Sihem Nemsia. President Saïed would not be satisfied with such remarks. The loan from Afreximbank certainly saves the Tunisian treasury momentarily, and Sihem Nemsia is satisfied with it, but the specter of bankruptcy has not left.

Doubt is allowed since President Saïed reacted the same day by asking the president of the government for more discipline on the part of the members of his team in the application of his directives. And even if President Saïed was not explicit in his criticisms, the reflections went directly to the remarks of the Minister of Finance saying before Parliament that one can only reduce debt by counting on oneself. The Tunisian president calls, when the opportunity arises, to rely on his own means, while his Minister of Finance assures that it is not enough.

Obvious lack of harmony. It is therefore necessary for the Tunisian power to tune in to establish a clear timetable of its objectives and the steps to achieve them. “Relying on one’s own means is a noble objective to which the necessary means must be granted”, assures the academic Sami Aouadi.

Tunis
From our correspondent Mourad Sellami