If Tunisia does not overcome its economic difficulties, an austerity program will be inevitable next year with thousands of public sector job cuts and new taxes, prime minister-designate Youssef Chahed told parliament on Friday.
The North African state is struggling with lower tourism revenues after two Islamist militant attacks on foreign tourists last year hit what is one of its key industries. Strikes and protests for jobs have also hurt state phosphate production.
Chahed has promised his new government will take tough decisions to help growth in the economy and create jobs as the country comes under pressure from international lenders to push through reforms and trim public spending.
Lawmakers were meeting on Friday to vote whether to approve Chahed’s new government – a broad coalition of secular, Islamist and leftist parties, independents and trade union allies whom he believes can deliver on economic reforms.
“If the situation continues like this then in 2017 we will need a policy of austerity, and dismiss thousands of public sector employees and impose new taxes,” Chahed told lawmakers before the vote.
Chahed, an ally of President Beji Caid Essebsi, promised a tough line on the economy. But critics question whether he has the political clout to overcome the labour union opposition, strikes and party infighting that have dogged past governments.
He said growth this year would not surpass 1.5 percent, below the official target of 2.5 percent for the year.
He said state production of phosphate — a major revenue earner — had declined in the past five years by 60 percent, while public wage pay-outs had more than doubled from 6.7 billion dinars ($3.06 billion) in 2010 to 13.4 billion dinars in 2016.
He expected the budget deficit to widen by 2.9 billion dinars to reach 6.5 billion dinars by the end of 2016.
Chahed, at 41 the youngest Prime Minister Tunisia has had, said his government would be tough with illegal strikes.
“We will not allow interruption of production at any factory and we will be firm and severe in dealing with illegal strikes and sit-ins.”
He vowed to press ahead with economic reforms sought by international lenders such as the International Monetary Fund and World Bank.
At 13.5 percent of GDP, Tunisia’s public sector wage bill is proportionately one of the highest in the world. But labour unions and other groups have resisted attempts to reform pensions and introduce more taxes.
Around $3 billion is due in debt service payments next year and the state is likely to struggle just to come up with the roughly $450 million it needs every month to pay employees.
($1 = 2.1900 Tunisian dinars)