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Despair in Ettadhamen: The harsh reality of the Tunisian economy

Ettadhamen is located on the outskirts of Tunis. Built in the 1950s for poor farmers in the Tunisian interior, the area has recently distinguished itself as fertile ground for the recruitment of fighters for violent groups, occasional clashes with the police and waves of the young and desperate leaving for a new life abroad.

Unemployment in Ettadhamen is estimated to be over 60 percent and poverty 70 percent.

When politicians in Europe, Tunisia and within the corridors of the International Monetary Fund (IMF) talk about economic reform and its consequences, they rarely cite Ettadhamen. However, this is where any possible cut in public spending will affect, and affect most deeply.

Ironically, at the same time that Ezzedine Zayani, president of the Tunisian Center for Global Security Studies, warned of three million citizens facing the future threat of food insecurity, the people of Ettadhamen describe living with its consequences.

Sheltered in an alleyway, away from the glare of the midday sun, Donia Mahmoudi, 50, described how she and her mother got by on the latter’s state pension of 70 Tunisian dinars (about $22) a week.

“Ten dinars a day goes towards the basics, like bread, milk and eggs,” he told a translator. “Before, I gave you fruit and more varied foods. Not now.

“Our health is suffering,” he said, his voice growing louder, “my mother’s too. Sometimes I have to sacrifice one thing to get the vitamins we need from another. It’s desperate.

Mahmoudi’s story resonates in Ettadhamen, from the grocer who has seen demand for all but 30 percent of his state-subsidized stock fall while the price of everything else has skyrocketed, to the butcher who wonders how long can he continue to sell red meat in the absence of any demand.

Regardless of the repeated narratives of successive governments, Tunisia’s economy remains largely untouched by time or progress. At almost every level, the country’s spending dwarfs its income as drought, inflation and rising global food prices take their toll on a beleaguered economic system.

Over the last 12 years, the government bureaucracy has nearly doubled, as successive post-revolutionary governments traded jobs for social peace.

The private sector, including many of its banks, is reported to be controlled by just 20 families, who, regardless of the revolution and economic crisis, continue to exercise a stranglehold on the prospect of competition, Le Point reported. Meanwhile, the shadow economy, outside of government control, flourishes and becomes a more prominent component of daily life for many.

While precise numbers are impossible to come by, economists and analysts widely agree that most of Tunisia’s economic activity takes place off the books and outside of government control.

Taking a wide swath of the population into account, this encompasses everything from the near-industrial-scale smuggling rings and illegal trades of towns like Ben Guerdane on the Libyan border to the second-hand stalls and fresh markets that they line the streets of all Tunisians. town and city.

Butchers wonder how long they can sell red meat in the absence of demand (Simon Speakman Cordall/Al Jazeera)

Koussay, 20, and his father have been transporting fruit from Kairouan, some 100 miles (160 km) away, to Tunisia to sell from the back of their truck since Koussay was a boy. Parked along a busy street of farmers and wholesalers, all selling their produce to passing shoppers, price hikes and food shortages have not gone unnoticed.

“I’m selling less and less,” he told a translator, “people no longer have money.” Koussay’s problems are compounded by drought and government water rationing recently introduced.

“He’s making life very difficult,” his friend says, with a smile and a cigarette dangling from his mouth.

From drought, monopolies and the black market, Tunisia must raise the funds to run its economy, while also paying off its debts, paying its wages and, crucially for many in Ettadhamen, paying its food subsidies.

Tunisia first began subsidizing basic food items in the 1970s, shielding the poorest among its population from wild swings in food prices. However, as the economy deteriorated and incomes fell, reliance on subsidized food became an absolute necessity, with unrest rapidly after the withdrawal of bread subsidies in the mid-1980s.

Today, Tunisia spends about 2.5 million dinars ($809,000) a year, about 4.6 percent of its GDP, on subsidies, down from 3.7 million dinars ($1.2 million). last year, as the government seeks to replace the subsidies with its direct cash transfer scheme. to those most in need.

However, as the aftershocks of the pandemic were allied with the war in Ukraine and the drought in the country, prices, especially wheat, are being pushed Always up. As the price of raw materials rises, so does the pressure on Tunisia’s economy and the foreign exchange reserves it relies on to pay for its imports.

A report from the financial ratings agency Fitch was unforgiving. Published in March, it characterized the possibility of Tunisia defaulting on its loans as “a real possibility.” If that were to happen and the value of the currency plummeted and inflation, already painfully high, exploded, the implications for those who live in Ettadhamen and the countless neighborhoods like it throughout Tunisia would be catastrophic.

However, while economists like Aram Belhadj of the University of Carthage took the possibility of a default seriously, they were reluctant to overstate the case.

“There is a risk,” he said. “However, I do not believe that a default is imminent. We have like 93, 94 days of importation, which is uncomfortable”, but not desperate, he said. The country’s foreign reserves, coupled with early signs of a successful tourist season, with strong currency inflowing, she added, mean that “default is not imminent, but the risk cannot be ruled out.”

Children jump in the back of a truck in slow traffic
Youngsters hitch a ride on a passing truck in Ettadhamen (Simon Speakman Cordall/Al Jazeera)

Price hikes are already testing many. Chokri Ben Fradj lives with her mother and three brothers. Unemployed, they all have to make do with what he can earn as a day laborer in Tunisia’s underground economy. “We are spending three times what we used to spend on groceries. Most of it goes to milk and bread,” he said.

One of the few glimmers of hope in Tunisia’s bleak economic sky is the prospect of a larger bailout from the International Monetary Fund, which, while well short of Tunisia’s acute financial needs, should theoretically jump-start the reform program needed to free up more credit. promised by donors elsewhere.

Yet while few would argue against the pressing need, Tunisian strongman President Kais Saied’s attitude toward foreign lenders imposing their “dictatorships” on his domestic program is said to have raised doubts within the IMF itself.

“Ultimately they will have to agree,” said Louai Chebbi, president of the NGO Alert, which campaigns for economic justice. “Eighty percent of Tunisian products are imported. To buy them, we need currency, and for that, we need loans.”

A potential bailout of any of the BRICS (Brazil, Russia, India, China and South Africa) states, as has been repeatedly discussed, remains fanciful at best, Chebbi said.

Trays with prepared baguette dough
Most of people’s money is spent on bread and milk (File: Jihed Abidellaoui/Reuters)

“These things take time. We’re talking about cultures and trade-offs that build up over the years, as they have between Tunisia and many of the Western states. We just don’t have as deep a relationship with, say, China,” he said. .

The increases in excise taxes are unlikely to provide Tunisia with a magic wand for its problems. Compared to its neighbors, the tax burden on Tunisian citizens, at least those who pay, is already relatively high. Increasing it further would not only wipe out much of Saied’s base, but would also be unlikely to make much progress in Tunisia’s desperate financial needs.

“As it is, we have a whole system designed to prevent much of society from accessing the country’s wealth,” Chebbi continued, speaking of the urgent need for Tunisia to pause, reconsider and adjust its course.

“This is an old system. Think about it. It goes back to (former colonial rulers) the beys, serving their court. They needed to keep their immediate courtiers happy in order to maintain their rule.

“The French inherited that system and they modernized it, but they didn’t change it,” he said, describing a cycle of modernizations without reform that continued through independence and revolution to the current system, in which a small number of families still control large swaths of the country’s wealth.

“Tunisia’s system, be it its economy, its bureaucracy or its police, is based on the idea of ​​an absolute ruler.

“Until you can change that,” he said, “you can’t change anything.”

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