Tunisia: A Troubled Ally

By John T. Haldane

"Tunisia today is in a period of suspended animation, waiting for a change of power."

—Christian Science Monitor, April 10, 1987

Tunisia, long a valued Arab ally of the United States, is facing serious political and economic problems. President Habib Bourguiba, now 83, has led this North African state since it obtained its independence from France in 1956. An energetic reformer, he transformed a small country about the size of Missouri, with a population of 7 million, into a model of third-world development. He dedicated a third of the national budget to education and made a prosperous middle-class his base of support and source of legitimacy. From the beginning, Bourguiba maintained a pro-Western political policy and close political and economic ties with both France and the United States. This was frequently difficult since Tunisia is situated between the more radical nations of Libya and Algeria.

Now, in view of the increasing economic problems facing his country, Middle East experts wonder how much longer Bourguiba will be able to hang on to power. Many of his policies are out of step with the country's youth, who constitute more than two-thirds of the population. He thus far has been reluctant to recruit a new generation of leaders to continue and expands his domestic programs.

To make matters worse, the tide of Islamic fundamentalism, flowing from the Ayatollah Khomeini's Iran, is lapping at Tunisian shores. Militant Islamic students clashed with police in the center of Tunis, the nation's capital, late in April. The young demonstrators chanted slogans against the President and in favor of Rashid Ghannouchi, leader of the small opposition Islamic Tendency Movement. Tunisian security officials have become harsher in their search for anti-government elements among university students and unemployed workers. The Tunisian government, aware that unemployment is very high and that several years of austerity budgets and consequent reductions in the standard of living are ahead, is running scared. The as-yet tiny opposition party has made much of a recent series of financial scandals, and complains that the Bourguiba regime has grown corrupt and inefficient.

Tunisia's worsening economic picture during the early 1980's came to a head in the summer of 1986, when it was forced to turn to the International Monetary Fund (IMF) and the World Bank for a rescue package. In return for desperately-needed loans, Tunis agreed to economic reforms, to be implemented during its 1987-91 Five-Year Development Plan. Several unfavorable economic factors forced Tunis's hand: lower world oil prices, a world glut of phosphate, a poor cereals harvest and a disastrous tourist season. It was clear that an austerity program was necessary to deal with rising service payments on external debts and surging imports.

The IMF insisted on such fiscal and monetary reforms as tax simplification, imposition of a value-added tax, and increased banking sector competition. Priority under the new Five-Year Plan will be given to maintaining and upgrading the existing infrastructure, rather than to expensive new projects.

Unfortunately for Tunisia, the new economic program coincides with the nation's entry into its post-petroleum-rich era. The country expects to shift from oil exporter to a net importer early in the 1990's. Tunisia produces around 100,000 barrels per day, but must import nearly 50 percent of its oil and petroleum product needs. How Tunisia will be able to adjust to living without an average $350 million in annual oil revenues is not clear.

Government officials talk of reorienting the economy in order to increase exports in such areas as textiles, leather and industrial goods, agricultural products and services. Foreign experts question whether Tunisian exports can penetrate already saturated West European and American markets. Tunisian exports of olive oil, for example, have been badly hurt by the entry of Spain and Portugal into the European Community.

In July 1986, the Tunisian Government had less than three weeks of foreign exchange remaining and an unfinanced budget gap of more than $200 million. President Bourguiba then dismissed Prime Minister Mohammed Mzali and replaced him with former Finance Minister Rashid Sfar, reportedly with a clear mandate to find a way to save Tunisia financially.

The present Finance Minister, Ismail Khalil, announced early this year that his government had secured sufficient external financing to cover its projected $450 million 1987 financial gap. Around $300 million is to come from concessionary sources, with the balance from commercial bank loans and supplier credits.

Some experts expect the economic situation to improve somewhat later this year. An August 1986 currency devaluation has helped non-oil exports, tourism is bouncing back considerably, and funds from Arab friends are increasing. Kuwait has agreed to provide $25 million more in aid than originally promised. Saudi Arabia, concerned about fundamentalist unrest in Tunisia, also has agreed to boost its aid contributions. Tunis wisely has gained agreement from its Arab donors to channel funds into balance of payments support, rather than into long-term project finance.

As in other developing countries where the IMF has forced economic restructuring, Tunisian austerity efforts are increasing financial support from abroad. France, Italy, West Germany, and several other European countries provided substantial sums in 1986, and Tunis hopes for even greater assistance this year. Tunisia, therefore, expects to use concessionary finance to support its precarious balance of payments.

In addition to West European help, Tunisia has long received economic assistance from the United States. In 1985, the US provided Tunisia with $96 million in foreign aid. For fiscal year 1987, however, aid dropped from an originally planned $87 million in a mix of grants, loans, and credits to only $48.7 million in grants. The Reagan administration has sweetened the pot, however, by offering an additional $40 million in military aid for fiscal 1988.

Bourguiba Unwilling to Designate a Successor

The combination of President Bourguiba's declining health, a lowering of the standard of living, and the repression of fundamentalist activities in the universities has turned attention to a likely successor. Two men believed capable of taking over from Bourguiba are Rashid Sfar, Prime Minister since July 1986, and Minister of Interior Zine Abidine Ben Ali, a US and French-trained general. But Bourguiba refuses to make a public commitment to either, and eligible candidates have learned to keep a low profile lest they irk the President.

Whoever succeeds Habib Bourguiba, US-Tunisian relations are likely to cool. Young Tunisians have not forgotten Washington's initial favorable reaction to the Israeli bombing of Palestinian headquarters in a suburb of Tunis, in which many innocent Tunisians were killed. At the time, Bourguiba publicly stated his personal feeling of betrayal by the United States. The Tunisian President was understandably furious since it was President Reagan, in 1982, who asked Tunis to take in the PLO so that PLO Chairman Yasir Arafat would agree to evacuate Beirut. Relations with the Reagan administration were further strained when American bombers raided Libya, Tunisia's neighbor and fellow Arab state.

During the next few years, Tunisia will face the same domestic pressures that caused Egypt such distress when it attempted to comply with IMF austerity program demands. Tunis already is facing local criticism for attempts to cut food subsidies. Given already high unemployment and the lack of career opportunities for graduating university students, Tunisia's economic problems will almost certainly create ever more serious political difficulties for the government.

John T. Haldane is a specialist in Middle East affairs who has served as a Foreign Service Officer in Baghdad, Beirut, and Cairo, and as an international economist with the Departments of Commerce and Treasury.