Posted by on June 19, 2014 in Blog

By Hanane Lahnaoui
Summer Intern, 2014

On Tuesday, June 3rd, the United States and Tunisia signed a $500 million loan guarantee agreement. The agreement gives Tunisia access to financing opportunities from international capital markets and signifies the ways in which the United States is supporting the democratic transition of Tunisia. In addition, the loan is a major step in enhancing the economic development of Tunisia and in supporting the country’s economic and political stability.

This specific loan agreement is a response to the promise President Obama gave to Tunisian Prime Minister Mehdi Jomaa during their meeting in the Oval Office on April, 4th 2014. During the meeting, President Obama reinforced the United States’ strong support of Tunisia’s transition and progress in various sectors. Prime Minister Jomaa discussed some of the fields that are critical to the development of the country, such as education, a focus on the sciences and technological advancements, and maintaining the stability and the security of the country.  The meeting served as an example of the various partnerships, forums and events held recently to foster the relationship between both countries.

This loan agreement is the second of its kind. The United States offered a similar agreement to Tunisia in 2012 worth $485 million and it proved to be successful in providing access to global capital markets that Tunisia was unable to access since 2007. Loan agreements are only one example of the financial and economic ties between Tunisia and the United States. Since 2011, the United States devoted $400 million of economic assistance to Tunisia in order to support its political advancement and its transition to democracy.

Signing this loan agreement is a very important contribution to the growth of Tunisia. However, it is more important to focus on how this form of aid will be spent. Because Tunisia is still going through a major transformation since the protests that swept the country at the end of 2010, there are also various social, political and economic reforms needed domestically. Therefore, it is necessary to focus on the most pressing challenges that the country is currently facing and to tackle them.

According to the 2013 Zogby poll on Tunisia, Tunisians described their priorities to be cost of living, employment opportunities and protecting personal and civil rights among others. Therefore, the loan should target these economic priorities in order to help maintain economic growth in Tunisia and respond to the needs of Tunisian society.  

Further, as of 2013, Tunisia’s deficit reached 6% of the country’s GDP. Accordingly, the recent loan agreement would also be a good resource to help the country reduce its deficit.  It is therefore vital to maximize political and economic security in the country in order to minimize risk and incentivize other countries to invest and trade with Tunisia.

In 2011, Tunisia’s GDP was the lowest among that of Egypt, Jordan, Lebanon and Morocco. However, by 2012, Tunisia’s GDP grew at a fast rate and also surpassed the growth of the previously mentioned countries except for Morocco. The graph below demonstrates this transition and shows that by 2012 Tunisia’s GDP grew by 3.6% which in turn made it better off than the rest of the countries in the chart. The fast growth rate that Tunisia achieved in the past year encouraged the United States to continue it supporting efforts and assistance for Tunisia.

While the United States is struggling in its policies toward several post-transition countries like Egypt and Libya, this loan agreement with Tunisia is an example of the support the United States can provide to countries shaken by the recent Arab uprisings. Tunisia has been one of the more hopeful countries in the region since 2011, and the loan shows that U.S. support can be both financial or in the form of cooperation and guidance for countries to become economically self-sufficient and broaden their economic horizons to reach and compete in the international market.

comments powered by Disqus