Tunisia preparing alternative IMF proposal, official says

TUNIS (Reuters) – Tunisia is preparing an alternative proposal to put to the International Monetary Fund (IMF) after President Kais Saied rejected the terms of a $1.9 billion loan agreement negotiated last year, a senior government official said.

Talks on the bailout have been stalled since October when Tunisia and the IMF reached a preliminary agreement, with Saied rejecting the idea of subsidy cuts and speaking out against the sale of state-owned companies.

The official said Saied believed cutting subsidies would hurt vulnerable people and the new proposal would not include such measures.

However, the official did not give any timeline for Tunisia to submit the proposal or for the likely negotiations it would involve with the IMF. The agreement reached in October took months of detailed technical negotiations to reach.

It is far from clear how long Tunisia can stave off bankruptcy and donors, increasingly worried about its stability, have pledged large additional sums if the government can reach a deal with the IMF.

On Sunday the European Union announced it was offering 900 million euros in loans contingent on an IMF programme.

U.S. Secretary of State Antony Blinken on Monday urged Tunisia to present a revised plan. Gulf states are also expected to offer support if an IMF loan is finalised.

Tunisia’s existing agreement also includes restructuring of state-owned companies, whose total debts the IMF said in 2021 accounted for 40% of gross domestic product. The official did not say if Tunisia wanted to amend that part of its proposal.

The official did not describe what other measures Tunisia might lay out to the IMF to bring down deficits and long-term debt if subsidies could not be cut.

Saied has said richer Tunisians should be taxed more heavily, but it was not clear if that could raise enough money to significantly bridge the funding gap and reassure donors.

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