Tunisia will use the breathing space given by its decision to postpone much-anticipated elections for three months to introduce sweeping financial sector reforms and draw up a new constitution, finance minister Jalloul Ayed told Emerging Markets on Wednesday.
Speaking from Tunis, where he presented a budget on Tuesday, Ayed said he expected to use the extra time to continue the push for bank consolidation and introduce a package of reforms.
“Every day counts, and now we are here until at least October we have time to set up a strong platform of structural reforms to the financial system that the next government can build on,” he said.
The banker-turned-minister had already been pushing an ambitious programme, planning to introduce legislation on creating a sovereign wealth fund, and on regulating private equity, micro finance, and banking and financial support for SMEs before the original July election deadline.
He expects to work on this with the African Development Bank (AfDB), World Bank and other partners, with a view to significantly strengthening a system so abused by fugitive former president Zine El Abidine Ben Ali.
Elections planned for 24 July were meant to choose a consultative assembly that would reflect the balance of forces in Tunisia following Ben Ali’s overthrow in January and draw up a new constitution so presidential and parliamentary elections could be held before end-year.
A senior diplomat in Tunis said Prime Minister Beji Caid Essebsi had set “a tight deadline” because the people wanted “accelerated political change”.
The elections’ postponement until 23 October was inevitable “because voter lists and credible election machinery was just not in place”, he said.
After October the new assembly will have to write a constitution and making critical decisions on whether Tunisia should have a presidential or parliamentary system.
Elections for state president and a new-look parliament will have to be held. In this context, “an elected government may not emerge until mid-2012”, the government source said. In the interim, the bulk of Essebsi’s technocrat ministers are expected to remain in place.
The government faces a tight financial outlook. AfDB and the World Bank have each committed budget support of $500 million while France has pledged Eu185 million.
This is helping to keep the economy afloat. “The budget I presented [on Tuesday] envisages a 5% deficit, and hopefully we won’t exceed that this year, which is remarkable in the circumstances,” Ayed said.
Mustafa Kamal Nabli, governor of Central Bank of Tunisia, said this week it was “inevitable” Tunisia would have to borrow more to cover its $3.5 billion balance of payments deficit and keep the economic cycle moving. In Vienna yesterday, he added that Tunisia would need at least $1 billion more this year.
Ayed ruled out any rescheduling. “There has been a lot of talk but I have been very certain on this: there will not be a rescheduling in any form, not on my shift”. However, debt-for-equity swaps will be negotiated with bilateral partners: “We need equity and everyone will be happy about this.”
Tunis had considered going to the international capital markets, but has not yet followed that course. Ayed also looked to tapping domestic markets for Eu300-400 million, “but liquidity was tight, and by drawing a bit of reserves we have been OK”.