Tunisia tourism could lose $1.4bn, as government eyes bond sale

Clothing factory CEO Khouloud Guesmi, right, checks a face mask at her production line outside Tunis after she repurposed her fashion business. Tunisia is in lockdown until at least Sunday. (AP)
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Updated 15 April 2020

Tunisia tourism could lose $1.4bn, as government eyes bond sale

  • Country seeks loan guarantee from bilateral partners to counter the effects of the coronavirus

TUNIS: Tunisia’s vital tourism sector could lose $1.4 billion and 400,000 jobs this year due to the coronavirus pandemic, an official document showed, as the country seeks a loan guarantee from bilateral partners to issue sovereign bonds this year.

In a letter sent to the International Monetary Fund (IMF) that was reviewed by Reuters, Tunisia’s central bank governor and finance minister said the country’s economy would shrink by up to 4.3 percent, the steepest drop since independence in 1956.

The IMF, which approved on Friday a $745 million loan to Tunisia to counter the effects of the coronavirus, said that a new funding program with Tunisia could start in the second half of this year. The size of the new program remains unknown.

The North African country has confirmed 747 cases of the virus and 34 deaths, and last month imposed a lockdown set to last until at least April 19. The outbreak is hammering its tourism sector, which represents nearly 10 percent of gross domestic product (GDP) and is a key source of foreign currency.

“We are working with partner governments on a potential guarantee for future sovereign bond issuances in the currently difficult international context,” the central bank governor and finance minister wrote in their letter.

The IMF said that the fiscal deficit in Tunisia would rise to 4.3 percent of GDP this year, compared with the 2.8 percent originally expected, due to the need for extraordinary expenditures over this crisis.

FASTFACT

4.3%

The IMF said that the fiscal deficit in Tunisia would rise to 4.3 percent of GDP this year, compared with the 2.8 percent originally expected.

As part of its 2020 budget, Tunisia plans to issue bonds worth up to €800 million ($877 million), but officials have not given any details or date for the issue.

The IMF said also in a report that Tunisia was seeking a loan guarantee from a G7 country.

The fund added that if such a guarantee were not forthcoming, Tunisia would need to seek alternative financing that could involve a syndicated loan from international banks.

In the letter, Tunisia pledged to contain its public wage bill, reform public companies and reduce subsidies for electricity and natural gas.

Prime Minister Elyes Fakhfakh said this month that the government has allocated about $1 billion to tackle the economic and social effects of the crisis. 


‘The stock market, stupid’ — Trump’s claim is looking hollow 

Updated 29 October 2020

‘The stock market, stupid’ — Trump’s claim is looking hollow 

  • The timing of the Wall Street downturn is the worst possible for the incumbent, who has declared every new peak in the S&P as a personal victory throughout his presidency
  • The likes of Apple, Amazon, Alphabet and Facebook are due to declare their earnings for the third quarter, and how those numbers are received could give the indices a boost

Before the US election of 1992, candidate Bill Clinton summed up what he saw as the reason he would become president: “It’s the economy, stupid.” He was proved right as voters disowned the economic policies of President George H.W. Bush in their droves to elect Clinton. 

Until the COVID-19 pandemic began to ravage the US economy in March, President Donald Trump would have been able to make the same claim. For the four years of his presidency, the US economy had continued the progress initiated by his predecessor to recover from the 2009 global financial crisis.

By most measures — growth, employment, inflation — the Trump years had been good, and those on the top of the pile had even more reason to be grateful thanks to the big tax cuts he had made a flagship policy.

The pandemic changed all that in the space of a few weeks as lockdown measures shocked the economy. Jobless claims soared to all-time records, bankruptcies and closures affected large swathes of American business, and gross domestic product collapsed. The International Monetary Fund forecasts that the American economy will shrink by 4.3 percent this year.

But Trump could still claim instead that “it’s the stock market, stupid” as a reason he could be re-elected. Mainly because of the trillions of dollars injected into the economy in the form of fiscal stimulus, US share indices had swum against the economic tide.

The S&P 500 index hit an all-time high in September, allowing Trump to boast that under his administration, investors and the millions of people whose livelihoods depended on the financial industry had never had it so good.

Now, it looks as though even that final claim is looking more fragile. For the past couple of days, US and European stock markets have gone into reverse as investors took fright at the rising number of COVID-19 cases and the re-imposition of economic lockdowns in many countries.

Trump might argue, with a little justification, that Wall Street is worried about the prospect of Joe Biden being elected president by the end of next week. Certainly the contender, by definition, is something of an unknown quantity in terms of economic policy.

He is also known to favor some policies — such as tighter regulation on environmental sectors, more spending on health care, and higher taxes for federal services and projects — that have traditionally been regarded as contrary to the philosophy of “free market” America.

In particular, the energy industry is worried about possible restrictions on shale oil and gas production that Biden and his “green” team are believed to favor. However, it should be pointed out that the Democratic candidate has specifically said he will not ban shale fracking, as some environmentalists want.

In any interesting side-story, the state of Texas — one of the biggest in terms of electoral college votes — would seem to have more to lose than any other if the energy scare stories about Biden were true. Yet the contest there between Democrats and Republicans is the closest it has been for decades, according to opinion polls.

The timing of the Wall Street downturn is the worst possible for the incumbent, who has declared every new peak in the S&P as a personal victory throughout his presidency and a sign of his deal-doing prowess. If even this claim is denied to him in the final week of campaigning, it would make the uphill battle against the polls even more difficult.

There is a chance that Big Tech might offer some relief. The likes of Apple, Amazon, Alphabet and Facebook are due to declare their earnings for the third quarter, and how those numbers are received could give the indices a boost, given that they were the ones largely responsible for the big market gains earlier in the year.

But for Trump, any such respite might be too little, too late. It looks as though Wall Street and Main Street are finally catching up in their gloom, and there is nothing the president can do about it.