Economist Ezzedine Saedan says the Tunisian economy is going through its weakest period ever and its collapse might foil the democratic transition.

Mr. Saedan, could you outline the general economic situation in Tunisia?

Economist Ezzedine Saedan says the Tunisian economy is going through its weakest period ever and its collapse might foil the democratic transition.

Mr. Saedan, could you outline the general economic situation in Tunisia?

The Tunisian economy has been in a very difficult situation since last year. For the first time ever, it took a downturn, which means that the growth rate will be either negative or in best-case scenario almost zero. This means that the Tunisian economy is currently unable to address its most demanding challenge, creating jobs. It might even cause job losses since the unemployment rate rose as high as 15.3 percent by the end of last year.

This situation raises questions about the country’s ability to continue settling its external debts and fulfill its international obligation. Note that since its independence, Tunisia has never defaulted on its external debts. The problem of aggravating debts will be evident this year and in 2017 in particular because there will be a large accumulation of due payments.

What are the causes of unemployment in Tunisia?

For the past five decades, the Tunisian economy has recorded a proper annual growth rate of 4.5-5 percent. There were however two main weaknesses: (1) Despite the pre-revolution economic growth, the country was unable to create a sufficient number of jobs and unemployment rates remained high, especially among university graduates, which was a major reason of the revolution. (2) The differences between regions and social groups have made the economic growth and development fragile.

What do you think about the recent demonstrations demanding employment that have swept the country?

These protests have been expected, but not with this force and severity. In my opinion, politicians and the government should have respected Tunisians’ minds by informing them of the economic and social situations. The unclear vision and deteriorating economic, financial and social conditions have led to a wave of rage and anger, especially among the youths, who are now wondering about the promises the current leaders made when they were candidates and about the achievements of the revolution.

Tunisians have been waiting on reforms for long five years, but the crisis has grown even worse. We should learn from these events in order to tell Tunisians the truth about the situation and develop an integrated plan to address the situation and re-drive the economy.

Do you think that the aggravating unemployment rate means that the adopted development policy was useless?

It is necessary to implement a new development policy. The situation since the revolution however has been unstable due to the coming into power of six governments that had no time to implement focused policies. All governments had problems and only came up with short-term solutions.

The adopted policies have disrupted the political balances in the country. People have been randomly recruited as civil servants. The state budget has deteriorated, not to mention the difficult conditions economic institutions are experiencing because of insecurity and the further exacerbating informal economy which now represents more than half the Tunisian economy. All these problems have made the Tunisian economy take a downturn. Recovery needs certain conditions and policies that have so far been unavailable.

What are these conditions and policies?

In 1986, a severe crisis engulfed the whole country, but the government managed to find a way out through a consensus on the causes and then on the solutions. A structural reform program was developed and in five years, Tunisia was able to fix the situation, re-drive the economy, realize proper growth rates, create wealth and provide jobs.

The situation now is more dangerous than in 1986, but this does not mean that solutions do not exist. There should be a consensus on the causes, which will inevitably lead to solutions.

Practically, what are the solutions for this economic crisis?

Essentially, driving investment because every economy depends on three drivers: investment, exports and consumption.

Consumption in Tunisia is suspended due to deteriorating purchasing power and increased informal economy and smuggling. Exports are disrupted too because economic institutions have not been able to benefit from the recovery of the European economy, the first partner of the Tunisian economy in terms of exports and imports.

The remaining drive is investment; therefore, profound reforms must be made to create an enabling investment environment. We should avoid short-term and improvised solutions because they only further the crisis and make any future reforms harder to achieve. Desperate diseases need desperate remedies. It is unacceptable that five years after the revolution no government could find mechanisms for resumption and timely implementation of large projects. If public investment is addressed, other sectors, especially the private sector, will recover.

Do you think that the new government development strategy 2016-2022 have solutions?

In my opinion, the strategy holds part of the solution but it also has huge discrepancies. For example, the strategy aims at decreasing the unemployment rate from 15 to 11 percent by the end of 2020, which means providing some 120,000 jobs, which is impossible now because the Tunisian economy has taken a downswing.

Moreover, the guiding document of the strategy includes a TND125-billion investment in a matter of five years, while we are unable to invest TND 10 billion a year. This requires the mobilization of external financial resources of nearly TND 65-70 billion. Who would give us money while Tunisia’s credit rating by international credit agencies is weak?

Furthermore, the strategy aims at achieving an annual growth rate of five percent, except for 2.5 percent during the first year, which is 2016, but even this small rate is hard to achieve.

What do you think of the new controversial investment draft law?

The drafting of this law took almost five years. The previous draft was inadequate, as if was concerned with a country other than Tunisia. It was necessary to examine experiences of other countries. We should have placed Tunisia in a competitive position to attract funds and investors and drive internal private investment.

I hope the parliament will not endorse this draft because it is defective and even worse than the previous one.

Do you think that the newly drafted public-private partnership law will be able to drive investment?

The partnership is a welcomed concept and it has helped several troubled countries to carry out investments while easing the burden on the country. Thus, there are great chances between the two sectors. But our problem in Tunisia is that the ratified laws remain unenforced pending the issuance of their implementing regulations.

Does the new budget, which the parliament has ratified, will recover the Tunisian economy?

The economy is in a difficult situation and the new budget only aims at arranging matters without finding a way out of the economic crisis because 45 percent of it will be paid as civil servants’ wages and 37 percent will be used to settle foreign debts and for the Compensation Fund and other managerial expenses, which means that 82 percent of the budget is not controlled by the government. The other 18 percent goes to public investment. Note that since the revolution, the government has not implemented more than 40 percent of public projects.

The new budget bodes a modest start for taxation and administrative reforms, while bold measures, even if painful, should be taken to avoid the collapse of the Tunisian economy because its collapse thwarts the democratic transition.

Does the government of Habib Essid have the ability to meet increased social demands?

This government has to learn a lesson because it has already missed a whole year without benefitting from the circumstances that would have allowed for a way out, like declined oil prices.

The political choices Tunisia has made are tough in terms of adopting the amended parliamentary system, one of the most challenging systems to be applied in emerging democracies. It stipulates that the winning party in the elections shall rule and shall appoint the prime minister. However, the current prime minister is independent, and he consequently found himself in a dilemma and in a nearly impossible mission by forming a government from a heterogeneous coalition. He therefore was forced to abandon all good economic programs because each party in the coalition wanted to implement its own program, which caused the prime minister to come up with a hybrid program that turned out to be unworkable.