Saudi Arabia aims to bolster Tunisian economy with $500 million loan and grant
In an effort aimed at supporting the stability of Tunisia’s economy, Saudi Arabia will offer the North African country a concessional loan of $400 million and a grant of $100 million.
The agreement was signed between Saudi Minister of Finance Mohammed Al Jadaan and his Tunisian counterpart Sihem Boughdiri, according to the official Saudi Press Agency.
Highlighting the strength of relations between the leaderships of the two countries, Al Jadaan said the loan and grant are an extension of the Kingdom’s earlier efforts.
The Tunisian economy has been battered by a COVID-induced slowdown, deteriorating finances, high debt, current account deficit and Russia’s invasion of Ukraine.
The country is in immediate need of funds to address the crisis. It had sought $4 billion in funding from the IMF about a year ago.
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Despite reaching a staff-level agreement for a 48-month extended fund facility worth $1.9 billion, the IMF board did not approve the facility as the government couldn’t meet the conditions.
One of the cited reasons for its failure was Tunisian President Kais Saied’s opposition to an agreed reform of fuel subsidies.
Concerns over the country’s failure at meeting the IMF requirements lead to Fitch Ratings downgrading Tunisia’s rating into junk territory last month.
With the junk status, a country encounters even more challenges while trying to gain access to capital markets and raise funding.
Meanwhile, as inflation eased, the central bank of Tunisia decided to keep its key interest rate unchanged at 8% last month.
The economy recorded a 2.1% growth in the first three months of 2023 after growing by 1.8% in the previous quarter owing to the better performing tourism sector and export industries.
While inflation is projected at 8%, Tunisia’s economy could post a growth of 1.6% this year, according to the IMF.
