Regional partners pledge billions in help for Tunisia

TUNIS (Reuters) - Regional and Western partners promised Tunisia about $8 billion in aid and loans over the next four years on Tuesday, offering some respite for a post-revolution economy that has struggled to attract investment and create jobs.

Tunisia's President Beji Caid Essebsi (C), French Prime Minister Manuel Valls (R) and Qatar's Emir Sheikh Tamim bin Hamad Al-Thani attend the opening of international investment conference Tunisia 2020, in Tunis, Tunisia November 29, 2016. REUTERS/Zoubeir Souissi

The money announced at a two-day investment conference in Tunis included $1.25 billion in aid from Qatar, the biggest single pledge of its kind to Tunisia since a 2011 uprising ushered in a democratic transition but also years of economic uncertainty and weak growth.

The European Investment Bank (EIB) said it would lend Tunisia a total of 2.9 billion euros ($3.1 billion) by 2020, while the Arab Fund for Economic and Social Development committed to $1.5 billion in soft loans over the same period.

Saudi Arabia is to give $800 million and Italy 560 million euros ($595 million) in loans and aid. Kuwait said it would lend $500 million, and Turkey announced it would deposit a $100 million zero-interest loan at Tunisia’s central bank.

Tunisia is also expecting to sign deals worth some 10 billion Tunisian dinars ($4.3 billion) to finance economic projects during the conference, said Khalil Abidi, a senior Tunisian official.

Representatives from some 40 countries are in Tunis for the event, Tunisia 2020. As well as seeking financial aid, Tunisia is trying to reverse a decline in foreign investment following the revolt that toppled Zine El-Abidine Ben Ali five years ago.

The North African country has been lauded as the sole political success story of the Arab Spring for its democratic transition, and is frequently praised for its economic potential. But it has made slow progress on economic reform.

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Labor unrest and militant attacks have hit investment and tourism and unemployment is high, especially among the young. Corruption and cronyism are widespread and parts of the interior remain severely marginalized.

“Tunisia has been passing through a very particular phase and requires a level of support that it would not normally need,” Tunisian President Beji Caid Essebsi told the conference.

Foreign partners have previously said they are willing to provide aid and loans, but Tunisia has complained that pledges are not always fulfilled. Securing long-term economic investment has been more of a challenge.

“A large number of the announcements were for loans for projects. We didn’t hear that much about investments,” economic analyst Ezzdine Saidane told Reuters. “Loans are fine but they are also going to deepen Tunisia’s debt.”

France, the main sponsor of the event along with Qatar, said it would allow Tunisia to convert an unspecified amount of debt into financing for new investments. Tunisia said it had a pledge from Qatar to postpone the repayment of $500 million in debt.

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Most of the money pledged by Qatar was for financing projects, Tunisia’s investment minister said.

Prime Minister Youssef Chahed’s government says an investment law approved in September can help revive the flow of foreign capital. It cuts bureaucracy, limits taxes on profits and eases restrictions on transferring funds out of the country.

Under pressure from international lenders, Chahed’s government is also pushing a package of measures in its 2017 draft budget aimed at cutting public spending and raising new revenue to reduce the deficit.

But the move risks provoking a new wave of social unrest, with several sectors either holding strikes or threatening to do so over proposed new taxes and a public salary freeze.

Tunisia recently cut its 2016 growth forecast to 1.5 percent from 2.5 percent. Its fiscal deficit for next year is projected to be 5.4 percent of national output.

Writing by Aidan Lewis; Editing by Hugh Lawson and Gareth Jones