Tunisia: rate hike squeezes workers, consumers and local business

The Tunisian government should fight tax evasion, illicit financial flows and labour exploitation instead of raising interest rates and following other IMF policies that crush consumers, workers and local businesses alike, according to the ITUC.

Tunisian Central Bank’s decision Wednesday to raise interest rates up to 6.75 per cent comes at a moment of economic hardship for Tunisians. Inflation reached 7.7 per cent at the end of May, wages were frozen in the public sector and consumption taxes were increased.

‘‘In recent years, interest rate hikes have failed to reduce inflation. This increase will further slow the sputtering Tunisian economy, causing greater hardship,’’ said Sharan Burrow, ITUC General Secretary.

The International Monetary Fund has encouraged an interest rate hike while requiring the Tunisian government to fully open its foreign exchange market to attract foreign investment. But the move also leads to higher rates for local small businesses with job-creating potential.

According to Noureddine Tabboubi, General Secretary of the Tunisian trade union centre UGTT, “Such a measure has negative repercussions on investment and growth, which will exacerbate the current economic crisis and further deteriorate the already dilapidated purchasing power of workers.’’

The ITUC is calling on the Tunisian government to stop tax evasion, illicit financial flows and fight exploitation of workers in the informal economy. It should also avoid laying off public employees as the IMF had advised in the past.

“The government should establish fiscal and monetary policies that contribute to job creation and further develop the local economy, and the international community including the IMF must support this,” said Burrow.