When subsidized bread sticks began to run out in bakeries just before Ramadan, the social situation suddenly became tense in Tunisia. The country is one of the biggest consumers of bread in the Arab world but also one of the biggest wasters, with nearly 900,000 baguettes thrown away daily according to the Tunisian Consumers Organization. In question, the low cost of the basic baguette, subsidized by the State like other food products (sugar, vegetable oil, semolina…) and sold for 190 millimes dinar (about 0.06 euro).
Since the 1970s, the General Compensation Fund in Tunisia has fixed the prices of certain foodstuffs to relieve the purchasing power of Tunisians, particularly those from the underprivileged classes. Created at the time to compensate for the surge in prices on the world markets, the system gradually entered into a ” vicious circle “ consisting of going into debt in order to be able to subsidize, describes the economist Hachemi Alaya, who participated in its implementation. “The basic rule was that the fund should take advantage of state revenue when prices fell on international markets to offset the increase over other periods,” he explains. But price volatility and Tunisia’s dependence on imports quickly caused an imbalance, with the state advancing money without then being able to recover it.
Budget cuts
Today, the Caisse is one of the black holes in the Tunisian state budget, which is already heavily indebted. According to the forecasts of the 2022 finance law, expenditure related to compensation is around 2 billion euros, or 6% of GDP. And these estimates do not take into account the impact of the war in Ukraine, which broke out after the law was enacted. The text provided for a barrel of oil at 75 dollars (about 71 euros). It hit $110 today. Wheat and grain prices also soared.
The system is considered to be faulty because sectors that freely set their prices make undue use of these products. “In a restaurant where the bill is 100 dinars [31 euros] per person, we will still serve you subsidized bread or cook frying in subsidized vegetable oil. Ditto for pastries that sell cakes at the price they want, but using subsidized sugar,” explains economist Radhi Meddeb.
In negotiations with the International Monetary Fund (IMF) to obtain new financial aid, Tunisia is considering budget cuts in order to manage the effects of two years of pandemic and the war in Ukraine. What put back on the table the question of a reform of the Compensation Fund. But the subject is politically explosive. “The successive governments have never been able to achieve this”, explains Hashemi Alaya. Since the bread revolts of 1984, triggered by a price increase demanded by the IMF, “there is a political and historical trauma”, according to the economist.
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