Global Arab Network | Post-revolution election – Tunisia opening economic doors

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Post-revolution election – Tunisia opening economic doors

Global Arab Network - - Amal Hasson

Friday, 16 December 2011 03:03

http://www.english.globalarabnetwork.com/images/stories/2010/MAY/Tunisia_currency_.jpg

Global Arab Network - With the country’s first post-revolution election now successfully concluded, Tunisia’s government once again has begun to focus on economic policymaking, in a bid to mitigate some of the uncertainty brought about by the political instability, Global Arab Network reports according to OBG.

The moderate Islamist Ennahda won 90 of the 217 seats in the October 23 poll, more than three times as many as its nearest rival, the Congress for the Republic (CPR), securing just over 40% of the popular vote. However, while having a strong mandate to form the next government, party officials have been quick to stress Ennahda’s commitment to a market economy, one that gives greater emphasis to the private sector.

At the end of October, senior Ennahda official Rached Ghannouchi told the Reuters news agency that the party had a liberal economic programme that would encourage investment.

“We are committed to providing a climate which is far from corruption and which allows the interest of the investors to be protected,” he said.

On November 9, Hamadi Jebali, the secretary general of Ennahda – shortly before he became the country’s next prime minister later in the month – told a meeting of party officials and representatives of the Association of Stock Market Brokers that the new government would strive to encourage and support both Tunisian and foreign investors. Ennahda would also work with all elements of society and the political sphere to build consensus and a sound economic development scheme, he said.

While stressing its commitment to rebuilding the economy, Ennahda differs from the interim administration it will be replacing in terms of how this will be achieved, and on how to pay for that regeneration.

According to Ridha Saidi, the head of Ennahda’s economic bureau, the incoming government is wary of dipping too deeply into the international debt market to fund reforms and new projects. Tunisia’s interim government had drafted an economic package, dubbed the Jasmin Plan, which encompassed legislative and regulatory reforms aimed at creating a more open business climate with extensive investments and incentives to boost economic activity. Of the plan’s $87bn budget, some 30% was to be raised through overseas borrowings, a level Ennahda saw as too high.

“We cannot mortgage the country and future generations,” Saidi told local media on November 13. “We pay as much for the debt than we do for the debt’s interest itself: it’s a lot, and Greece is a great example of what can happen with high debt.”

As an alternative, Ennahda has proposed opening up the financial sector to greater participation via sharia-compliant lenders, who are a recent arrival in the country, while also considering making use of sukuk, or Islamic bonds. By encouraging more Islamic banks to enter the local market, and by making use of the products the sector offers, Ennahda officials such as Ridha Chkoundali believe the country’s banking industry will be strengthened.

“The banking system will be diversified and the Tunisian financial market will therefore be made up of traditional and Islamic banks,” said Chkoundali, an economics professor and one of those shaping the party’s economic programme. “As a result, there will be more competition between the banks,” he added.

Another reason that the government may be unwilling to raise loans overseas is the potential cost. In early November – just days after the election results were announced – ratings agency Standard & Poor’s (S&P) reaffirmed Tunisia’s BBB- rating, with a negative outlook assessment, first assigned to it in March. Such a rating would make lenders slightly wary, especially with the international debt markets deeply troubled by events across the Mediterranean, while interest rates would be at the higher end of the scale.

It its statement, S&P said the outcome of the ballot itself was not a factor in its decision not to improve Tunisia’s ratings or outlook. Moreover, the agency said it would be closely following “whether the new government will support the economic recovery by taking medium-term policy measures and pursuing structural reforms while maintaining macroeconomic stability”.

While sending out positive messages to local and foreign businesses, the new government will need to act fast to improve the lives of Tunisians on the street. Data issued by the National Institute of Statistics in early November shows that unemployment topped 18% as of the end of May, with just over 700,000 registered as jobless, some 200,000 more than a year before.

With most analysts forecasting modest economic growth at best this year, and with GDP predicted to either remain stagnant or rise by 1%, according to local media, the government will be looking to the new year for signs of recovery, and with it an increase in hirings to help drain off some of the unemployment pool.

In order to achieve this and other goals set by the party, such as boosting GDP by 7% annually between 2012 and 2020, increasing per capita income from $4400 to $7000 and making the economy more resistant to external shocks, Ennahda is going to have to work hard alongside both domestic and foreign investors. (OBG)

Global Arab Network

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