Despair in Ettadhamen: The harsh reality of Tunisia’s economy

Ettadhamen sits on the outskirts of Tunis. Built in the 1950s for the agricultural poor of Tunisia’s hinterland, the area has found recent distinction as fertile ground for recruiting fighters for violent groups, occasional clashes with the police, and the waves of young and desperate people who leave for new lives overseas.

Unemployment in Ettadhamen is estimated to run at more than 60 percent and poverty, at 70 percent.

When politicians in Europe, Tunis and within the corridors of the International Monetary Fund (IMF) talk of economic reform and its consequences, they rarely cite Ettadhamen. Nevertheless, it is here that any potential cuts in government spending will bite, and bite the deepest.

Ironically, at the same time as Ezzedine Zayani, president of the Tunisian Center for Global Security Studies, warned of three million citizens facing the future threat of food insecurity, the inhabitants of Ettadhamen describe living with its consequences.

Sheltering in an alleyway, away from the glare of the midday sun, 50-year-old Donia Mahmoudi described how she and her mother got by on the latter’s state pension of 70 Tunisian dinars (about $22) a week.

“Ten dinars a day goes on the basic things, such as bread, milk and eggs,” she told a translator. “It used to get you fruit and more varied foods. Now it doesn’t.

“Our health is suffering,” she said, her voice growing more forceful, “My mother’s, too. Sometimes I have to sacrifice one thing, to get the vitamins we need from another. It’s desperate.”

Mahmoudi’s story echoes across Ettadhamen, from the shopkeeper who has seen demand for everything but the 30 percent of his state-subsided stock fall, while the price of everything else has rocketed, to the butcher questioning how long he can continue to sell red meat in the absence of any demand.

Irrespective of repeated narratives by successive governments, Tunisia’s economy remains largely untouched by the passage of either time or progress. At almost all levels, the country’s outgoings dwarf its income as drought, inflation and the worldwide surge in food prices grind away at a beleaguered economic system.

Over the last 12 years, government bureaucracy has nearly doubled, as successive post-revolutionary governments traded jobs for social peace.

The private sector, including many of its banks, is reported to be under the control of just 20 families, who – irrespective of revolution and economic crisis – continue to exert a stranglehold over the prospect of competition, Le Point reported. All the while, the grey economy, untouched by government control, flourishes, becoming a more prominent component of daily life for many.

While accurate figures are impossible to come by, it is broadly agreed by economists and analysts that the bulk of Tunisia’s economic activity takes place off the books and outside of government control.

Taking in a broad stripe of the population, this encompasses everything from the near-industrial scale smuggling networks and illegal exchanges of towns such as Ben Guerdane on the Libyan border to the second-hand stalls and fresh produce markets that line the streets of every Tunisian town and city.

Twenty-year-old Koussay and his father have been ferrying fruit from Kairouan, some 160km (100 miles) away, to Tunis to sell from the back of their pick-up since Koussay was a child. Parked along a busy street of farmers and wholesalers, all hawking their produce to passing shoppers, price rises and food shortages have not passed him by.

“I’m selling less all the time,” he told a translator, “people don’t have the money any more.” Exacerbating Koussay’s problems are the drought and the water rationing the government recently introduced.

“It is making life very hard,” his friend says, a grin and a cigarette hanging from his mouth.

From drought, monopolies and a black market, Tunisia must draw the funds to run its economy, while making payments on its debts, meeting its wage bill and, critically for many in Ettadhamen, paying its food subsidies.

Tunisia first began subsidising staple food products in the 1970s, sheltering the poorest among its population from wild variations in food prices. However, as the economy withered and incomes shrank, reliance on subsidised food has become an absolute necessity, with riots quickly following the withdrawal of subsidies on bread as far back as the mid-1980s.

Today, Tunisia spends about 2.5 million dinars ($809,000) a year, about 4.6 percent of its GDP, on subsidies, down from 3.7 million dinars ($1.2m) last year, as the government seeks to replace subsidies with its plan for direct cash transfers to those most in need.

However, as the aftershocks of the pandemic allied with the war in Ukraine and drought at home, prices, especially of wheat, are being pushed ever upwards. As the price of raw materials increases, so too does the stress on both Tunisia’s economy and the foreign reserves it relies upon to pay for its imports.

A report by the financial ratings agency Fitch was unsparing. Published in March, it characterised the chance of Tunisia defaulting on its loan repayments as “a real possibility”. Should that happen and the value of the currency plummet and inflation, already painfully high, explode, the implications for those living in Ettadhamen and the countless neighbourhoods like it across Tunisia would be catastrophic.

However, while economists such as Aram Belhadj from the University of Carthage took the chance of a default seriously, they were reluctant to overstate the case.

“There is a risk,” he said. “However, I don’t think a default is imminent. We have about 93, 94 days of imports, which is uncomfortable,” but not desperate, he said. The country’s foreign reserves, along with early signs of a successful tourist season, with its influx of hard currency, he added, meant that “a default is not imminent, but the risk cannot be dismissed”.

Price rises are already testing many. Chokri Ben Fradj lives with his mother and three siblings. Unemployed, they all have to get by on whatever he can earn as a sporadic day labourer in Tunisia’s grey economy.

“We’re spending three times what we used to on groceries. The bulk goes on milk and bread,” he said. Both bread and milk have been in short supply lately as the cost of inputs rises.

One of the few glimmers of hope in Tunisia’s dark economic sky is the potential for a further bailout from the International Monetary Fund, which, while way short of Tunisia’s acute financial needs, should theoretically kick-start the reform programme needed to free up further credit promised by donors elsewhere.

However, though few would argue against the acute need, Tunisia’s strongman President Kais Saied’s attitude to foreign lenders imposing their “diktats” on his domestic programme is said to have raised questions within the IMF itself.

“They will have to agree in the end,” Louai Chebbi, president of economic justice campaigner NGO Alert, said. “Eighty percent of Tunisia’s products are imported. To buy those, we need currency and, for that, we need loans.”

A potential bailout from any of the BRICS states (Brazil, Russia, India, China and South Africa), as has been repeatedly mooted, remains fanciful at best, Chebbi said.

“These things take time. We’re talking about cultures and trade-offs that are built over years, as they have between Tunisia and many of the Western states. We just don’t have that depth of relationship with, say, China,” he said.

Increases in domestic taxation are also unlikely to provide Tunisia with any magic bullet for its problems. Compared with its neighbours, the tax burden on Tunisian citizens, at least those who pay, is already relatively high. Increasing it any further would not only kick away at much of Saied’s base, but it is also unlikely to make many inroads into Tunisia’s desperate financial needs.

“As things stand, we have an entire system designed to prevent much of society from accessing the country’s wealth,” Chebbi continued, talking about the urgent need for Tunisia to stop, rethink and adjust its course.

“This is an old system. Think about it. It goes back to [former colonial rulers] the beys, servicing their court. They needed to keep their immediate courtiers happy to maintain their rule.

“The French inherited that system and modernised it, but didn’t change it,” he said, describing a cycle of modernisations without reform that continued through independence and revolution to the present system, where a small number of families still control huge swaths of the country’s wealth.

“Tunisia’s system, whether that is its economy, or its bureaucracy, or its police, is built on the idea of an absolute ruler.

“Until you can change that,” he said, “you can’t change anything.”