The war within the war or how the IMF is controlling what is left of Tunisia's food structure?

The war within the war or how the IMF is controlling what is left of Tunisia’s food structure?

16 March 2023

war

The Russian-Ukrainian war has created an inherently tense situation, to which crisis after crisis have been added. A political crisis has emerged since Ennahda forced the Fakhfakh government to resign in July 2020 and the President Kais Saied’s rejection of the ministerial shuffles of Prime Minister Hichem Mechichi, the latter having been chosen by Kais to then team up with Ennahda, which has resulted in a government whose ministers are mostly interim ministers. This culminated in the exceptional measures taken by Kais Saied on July 25 to dismiss the government and then dissolve parliament in order to have all powers concentrated in his hands.

In addition, Tunisia is experiencing an economic indicators crisis, with high inflation rates and difficulties in the financial balance of many public institutions. However, the most prominent signs of this crisis have been the constant downgrades in the ratings of Tunisia¹ among various international rating institutions due to its failure to implement “reforms”, which has led the global financial markets to deny access to the Tunisian government, and to shut down the possibilities of borrowing from “sister” countries and international funding institutions. Thus, the year 2022 was placed under the sign of the frantic search for an agreement with the International Monetary Fund in order to “rebuild the trust of markets and donors” towards Tunisia.

the Fund has imposed on the Tunisian government a severe austerity policy to allow it to have access to loans, which would help revitalize its economic indicators and reopen the doors to world markets.

Hence, the Russian war occurred within this context, carrying with it the cereal crisis – its high prices and scarcity of sources – as well as the increase in fuel prices and the worsening of inflation since the end of the pandemic. However, the war has not brought, for Tunisia, those expected consequences arising from the aforementioned aspects in the global markets of wheat and oil alone. It was also an opportunity for the International Monetary Fund to tighten its grip on the Tunisian Government, taking advantage of the resulting growing trade deficit and the decline in its hard currency reserves.

Thus, the Fund has imposed on the Tunisian government a severe austerity policy to allow it to have access to loans, which would help revitalize its economic indicators and reopen the doors to world markets. Therefore, there was a twofold war on the Tunisian food system: the Russian war on Ukraine and the IMF war through the artillery of debts and the tanks of austerity in all areas, which have ravaged the nation.

Tunisia’s status before the pandemic: an export-oriented agriculture

The cultivated area in Tunisia is about 4 million and 200 thousand hectares², of which about 55% is allocated to fruit trees (two million and 300 thousand hectares) and 28% to cereals (one million and 200 thousand hectares). Pulse crops and vegetables occupy only 5% (230 thousand hectares). Olive cultivation accounts for one million and 700 thousand hectares³, about 73% of the area allocated to fruit trees. This is a preliminary overview of Tunisia’s agricultural map in 2018. However, these figures can also be viewed within a chronological context. Looking in particular at the areas allocated to cereals, we notice a steady decline since the mid-1980s until recent years, from rates exceeding one million 500 thousand hectares⁴ to one million 260 thousand hectares in the last decade⁵, representing a decline of 16%. In fact, the State’s needs in cereals have increased in the same period, and have pushed it to import more, as quantities imported have increased from about one million tons per year to two million and 500 thousand tons⁶, resulting in a sustained deficit in the indicator of cereal needs coverage amounting to 45%⁷. The area allocated to pulse crops and vegetables has remained relatively stable at 230,000 hectares. On the other hand, the State has encouraged investment in olive and citrus farming⁸.

Therefore, the agricultural policy is tending to neglect the basic crops for feeding Tunisians, such as wheat, and instead expands export crops such as citrus fruits and olive oils. This policy has its roots in earlier colonialism. The French colonizer considered Tunisian agricultural land to be entirely under its control, and used it to ensure its food security, and to provide a back-up in case of disasters on its land. For example, researcher Haithem Smida Kasmi reports that “In 1932, wine growing in Tunisia was expanded due to its wine to reach an area of about 50,000 hectares, 90% of which was exported to the French market following the devastation of French vines caused by the Phylloxera insect. The economic depression of 1929 also triggered the expansion of citrus production, which proved to be a lucrative commercial agriculture to compensate for the global cereal overproduction crisis, thus bringing about the so-called “citrus revolution” reinforced by Spanish production shortages due to the civil war and the disruption of Italian exports as a punishment for its invasion of Ethiopia. On the other hand, with regard to cereal production, Tunisian farmers were only familiar with durum wheat and barley farming until the French colonial authorities introduced soft wheat in agricultural cereal production, which was mainly intended for export to the country of “baguette” ⁹”.

This dependence has been enhanced, especially during the period of “openness” Tunisia, e.i. open market policies, has gone through since the seventies, with one of its most prominent aspects being the Northern Waters Project ¹⁰, accomplished at the end of the seventies, to divert the waters of the North towards the Cap Bon region, a region dedicated to citrus production. Today, citrus fruits consume between 22% and 33% of Tunisian dams storage capacity¹¹, depending on years. These open market policies continued after the introduction of the agricultural structural reform program in Tunisia at the end of the 80s whose objective is to get the State to withdraw from its adjusting role in the agricultural sector, allowing the law of the market to dominate. An example of this is fodder; the State took away the responsibility for supplying the corn needed to produce it from the Cereal Agency (Office des Céréales) which is a public institution, to allocate it exclusively to a private company -Carthage Grains- in the 1990s. In addition, most of the cereal collection and distribution channels, which were the exclusive responsibility of the Cereal Agency¹² in the early 2000s, have been privatized.

The state of agricultural policies in Tunisia prior to the pandemic can therefore be summarized as being limited to a food security approach, i.e. relying on the world market to provide the necessary food while promoting an export-oriented agriculture. This entails the depletion of water resources and the shrinking of crop areas intended primarily to feed the population, as well as the destruction of soils through the adoption of the single-crop model and the associated use of chemical fertilizers, in addition to the exposure of these crops to a variety of diseases, which in turn increases the consumption of pesticides.

How about cereals?

Cereals are the main nutrition element for Tunisians, representing 49% of calories, 50% of proteins, 42% of iron and 19% of calcium in their food regime¹³. The State policy aimed at ensuring food security through market mechanisms has led to the marginalization of its farming to the extent of importing 55% of our needs – that is to say, we import more than we produce – whereas between 1962 and 1966, for example, imports amounted to one third of the quantities produced locally¹⁴, (noting that the Tunisian government exported at that time some quantities of durum wheat to replace them with soft wheat, being a cheaper crop. As a matter of fact, cereals remained the only agriculture production in which the State could intervene to a certain extent. The Tunisian government relied on local production and imports to supply cereals. The Cereal Agency, as a public institution, is representing then the State’s arm in this area. On the one hand, it is charged with purchasing cereals from producers at fixed prices from the beginning of the cereal-growing season, and on the other hand, with supplying cereals from the world market. The purchase prices of the Cereal Agency from the international market or from local producers are higher than the selling prices in the internal market. In this context, the compensation fund¹⁵ will provide the gap between the two prices to the Cereals Agency. However, over time, this compensation mechanism has changed, especially with the advent of structural reform, from a tool to encourage producers by securing them a decent profit margin to a tool for pressure on prices. Consequently, compensation has become a matter of financial cost alone, and the relationship with local producers is then governed solely by the logic of cost pressure, which translates into pressure on local market prices¹⁶.

However, the relatively low prices at which the State buys cereals from local producers discourage them from taking the risk of large-scale farming, in addition to their inability to cover expenses and to renew their aging machinery¹⁷.

Indeed, the prices set by the State are very important in determining future cereal yields, as a study by the Food and Agriculture Organization of the United Nations (FAO)¹⁸ indicates that the increase in the purchase price from local producers in 2002 led to an increase in productivity from 12 to 15 quintals per hectare to rates of 15 to 20 quintals per hectare, and productivity increased several times to the level of 25 quintals per hectare.

All these policies have led to an increasing dependency on the world market for the supply of cereals. Tunisia’s main suppliers are Russia and especially Ukraine, i.e. the first and fifth largest exporters of cereals in the world. For example, between 2017 and 2019, these two countries have accounted for more than half of our cereal imports¹⁹. Needless to say, the war between these two countries will have a direct impact on our needs in cereals, since they are our main exporters of cereals, but also, and above all, since they provide a third of the world’s cereal exports, creating a global supply crisis. However, the impact of the war on Tunisia will not be limited to cereals, but will also be affecting several food products.

The impact of the war on Tunisia

If we examine the roots of the Tunisian government’s vulnerability to global crises, we must go back to the early 1970s, when the so-called socialist experience and the policy of growth through import substitution adopted by the government in the 1960s were abandoned in favor of the so-called ” open market” policy led by Bourguiba’s liberal minister, Hedi Nouira. At that time, the Tunisian government embarked on a policy of “growth through exports” based on the theory of comparative advantage: each country in this system must orient its production mechanism to the cheapest products in order to achieve self-sufficiency, exporting the surplus and importing what it lacks in products accounting for the comparative advantages of other countries.

The major underlying assumption here is that the market will adjust itself and make everyone happy. Because of the strong involvement of the Tunisian government in this system, the war has severely undermined the country’s overall economic conditions. It has accelerated the rise in commodity prices, especially oil, further aggravating inflation already felt worldwide. This has worsened Tunisia’s trade deficit. Until the end of August 2022, it has increased to the level of 16899 million dinars, which is an increase of 61%²⁰ with one of the most significant contributors to this deficit being energy which reached 6035 million dinars²¹ by the end of July 2022, representing an increase of 109% on year, and accounting for 35% of the trade deficit. The trade deficit has also been burdened by imports of cereals²², which reached 2883 million dinars by the end of August 2022, representing 17% of the deficit. This accelerated deficit has, in turn, led to a decrease in the hard currency stock of the Tunisian government covering 106 days of imports in October 2022 against 131 days of imports at the same time last year²³.

The Covid-19 crisis and then the Russian war on Ukraine were an opportunity for the IMF to twiste the arm of the Tunisian Government.

But that’s the point: the decrease in the stock of hard currency leaves the State with two options, given the logic of successive governments. Either reduce imports, which is not possible because it would expose Tunisia to sanctions under free trade agreements between Tunisia and northern countries. Also, attempts are made to increase exports, which is useless, since, like most of southern countries, Tunisia has a structural trade deficit, left over from colonial policies imposed on southern countries since the nineteenth century, which did not end after independence, but were institutionalized and legitimized under the umbrella of the Bretton Woods institutions²⁴. Alternatively, it could seek a loan from the IMF as a second option. Indeed, all international donors have been reluctant to lend to the Tunisian government because, over the past decade, it has refrained from carrying out so-called “painful reforms”.The decline in Tunisia’s credit rating has been repeated until it reached the lowest rank of most rating institutions. The Covid-19 crisis and then the Russian war on Ukraine were an opportunity for the IMF to twiste the arm of the Tunisian Government. Since the appointment of Najla Bouden’s government, it has been exerting pressure on the Tunisian government, convinced that it is a government with strong political backing that would allow for the implementation of all the “painful reforms” required.

The IMF conditioned the launch of reforms before allowing Tunisia to receive the desired loan. Bouden’s government has complied, and pressure has begun on public spending, as well as on public institutions, with recruitment being ceased. The pressure was particularly put on the expenditures of the compensation fund as a preliminary step to its elimination and replacement by a system of direct transfers to needy families. This pressure is reflected in the budget spending figures for the first half of the year 2022²⁵. The budget deficit has been reduced by 75%. Although the government has allocated 7262 million dinars as support expenditures for 2022, it has allocated only 2111 million dinars by the end of June 2022 (29%). We note, however, the dramatic decrease in the amounts of subsidies allocated to basic commodities, since an amount of 3771 million dinars was allocated in this section, of which only 400 million dinars (10.6%) were disbursed, compared to 850 million dinars in the same period of 2021, despite the sharp rise in commodity prices observed since last year. All of this has occurred despite the increase in the Tunisian government’s revenues from 15818 million dinars in the first half of 2021 to 19323 million dinars in the same period in 2022²⁶.

This austerity policy applied to subsidy expenditure has caused a lot of damage. The first of these is the meager cereal harvest that has been collected on the Tunisian territory. As we mentioned at the beginning, the purchase price set by the State has a direct impact on land yields, but also on the areas cultivated. Despite the relative increase in the purchase price of cereals on the domestic market²⁷, it has remained remarkably low compared to world prices. The purchase price for a quintal of local durum wheat was set at 130 dinars, compared with world market prices of 190 dinars²⁸ since the beginning of the year, and the purchase price for a quintal of soft wheat was 100 dinars, compared with world market prices of over 130 dinars since April 2022. These prices have not encouraged farmers to grow cereals in this season, especially small-scale ones, in a context where farms with an area of less than 20 hectares represent 87% of total cereal farms²⁹. Additionally, these low prices do not allow for a sufficient profit margin, nor for the acquisition of new equipment, nor even for the maintenance of existing equipment³⁰. As a result of low purchase prices compared to international prices, smuggling accounts for a significant portion of the cereal harvest, estimated at 15% of the harvest in Kairouan for instance³¹.

On the other hand, spending austerity measures on subsidies have adversely impacted the budgets of public institutions in charge of imports, such as the Cereals Agency, the Oil Agency, and the Trade Agency. It has become common for ships loaded with cereals to remain at the Tunisian coast awaiting payment from the Cereals Agency³². The austerity policy has also led to a similar crisis at the Oil Agency, resulting in a shortage in the markets, as the imported quantities of vegetable oil (subsidized and then channelled to lower income groups) have decreased from 162,000 tons in the first six months of 2019 to 139,000 tons in the same period of 2022³³. The Trade Agency has also had its share of crises, as the Tunisian government had experienced a severe shortage of sugar and coffee during the summer period.

Thus, the Tunisian government did not address the remnants of the war, but was a key player in deepening the crisis at home. Apart from its intervention to fix the price of animal feed against barons importing this good, it has added an economic crisis to a possible food crisis. This austerity policy led to the closure of some vegetable oil canning factories³⁴ and the worsening of coffee shop conditions³⁵. The damage has even reached bakeries, as the government has refrained from providing them with subsidies, which made their situation critical³⁶.

Policies to be implemented to secure food for all social segments

All of the aforementioned is merely an indication of the fact that Tunisia, given to its current governments, can only carry on with the colonial extractive agricultural policies. These governments are organically and ideologically linked to the interests of imperialism, and they cannot change one single bit in this approach. These policies will continue to place food and the fate of Tunisians in the hands of the global market, exacerbating food crises and accelerating their frequency along with global crises. However, this will not prevent us from highlighting what these governments can do sooner or later to first mitigate these crises and subsequently break with their causes, nor will we give up on telling the truth, as this is in itself a revolutionary act.

What has been mentioned above resulted from two main issues: the first one is the reliance of Tunisian farmland on a predominantly export-oriented agricultural model, which has been demonstrated, for example, through the nature of crops, as well as the amount of water resources allocated to them. The second is the Tunisian government’s engagement in austerity and reform policies. First, let’s agree on what these policies actually are. They are, in essence³⁷, budget contraction policies reducing the provision of credit to all the components of economy, but are primarily being applied on the public sector so that it does not compete with the private sector (hence the propaganda of liberals about the budget deficit), thereby reducing the resources of the State and its capacity for investment and financial expansion³⁸. They are also policies that always tend to let the market’s invisible hand play its role through the emergence of price reality, which explains the constant pressure for the elimination of “subsidies”. To overcome these two crises – immediate and structural – we must keep in mind their root causes.

First, the Tunisian government cannot provide the necessary food to Tunisians while pursuing its austerity policy, which are two totally opposite objectives³⁹. The austerity policy is not related to the State’s revenues, but rather to an ideological project whereby the State gives up its role as the guardian and be replaced by the market. All of this is done to satisfy the International Monetary Fund, “the rescuer ” of governments with its loans for every crisis. The sustainability of the compensation fund must therefore be fiercely defended, as it is an essential element in any agricultural policy adopted by the State. The first measure to be taken under the compensation fund is to increase the purchase price of local cereals to bring it into line with international prices, as an incentive for farmers to cultivate the largest areas possible and to be able to carry out the maintenance work needed for their equipment. At the same time, opportunities for the smuggling of cereals would be eliminated.

Secondly, the debts of all small farmers should be cleared because they are the pillar of the desired food sovereignty. Another party that we sometimes miss can intervene: the central bank can buy all the farmers’ debt titles without this having any impact either on its budget – since it is sovereign in the creation of money – or on inflation rates, as critical monetary economists fear, since inflation is mostly imported and the State is now experiencing a liquidity shortage, not the reverse⁴⁰. This is not possible today in a legal system that gives the central bank total independence from the State, but total subservience to the interests of banks and international financial institutions. The central bank is primarily responsible for the implementation of the budget contraction policy by preventing the provision of loans. Monetary sovereignty – that is, sovereignty over the central bank – must be restored and freed from financial interests. In the same vein, the central bank can require banks to grant soft loans to small farmers without the guarantees required by banking bureaucracy: the guarantee of the central bank shall suffice.

The debts of the various public institutions entrusted with feeding all Tunisians, namely the Cereals Agency, Oil Agency and the Trade Agency, must also be cleared so that they can urgently fulfill their tasks of supplying food through the global market. Short-term procurement is inevitable in the current situation resulting from previous agricultural policies. This action is essential and must be carried out by the central bank. The first reason for the financial crisis of these agencies is the non-payment by the State of the due subsidies, but another important reason is the result of the Central Bank’s policies in bringing down the value of the dinar, which has exacerbated the amounts of these agencies’ debts in hard currency.

The above are urgent policies. But the solutions cannot, of course, be purely financial/monetary. What we are experiencing today is mainly due to the connected agricultural policies adopted by the State – policies that have placed exports at the top of priority lists and made of the market the prevailing logic. This extractive model, in which citrus fruits absorb a third of surface water resources, while cereal crops remain at the mercy of rainfall, are out of the question. This is a model in which extensive palm farming for the production of Deglet Ennour – intended for export – predominates, leading to the depletion of groundwater resources in the oases, along with the destruction of traditional agricultural models. On the other hand, it is out of question that the market remains in control of our food, as is the case today in the fodder sector, where some barons hold control over the destinies of livestock farmers without even considering ways to produce local types of fodder suited to the nature of the Tunisian soil and climate. Finally, and in the first place, the land must not belong to investors who are plundering it⁴¹ and exploiting it for export products to the detriment of water resources, ecological balance and people’ s food, the land must rather be given back to farmers.

These measures require a political will to break with the austerity and reform system and to treat food as a commodity like any other. Therefore, these are all policies that require a break with the colonial system, which the countries of the South are subjected to.

Walid Besbes – Tunisia

This article is taken from our special issue on “The Russian-Ukrainian war and its impact on food in North African Countries“
Read and Download the issue from The link

See for example : Notation en baisse de la Tunisie, qu’elle est la cause? – L’économiste maghrébin – Mars 2022.
Yearbook of Agricultural Statistics (2019)
Our food, our farming, our sovereignty. Working Group on Food Sovereignty, June 2019.
Analyse de la filière céréalière en Tunisie et identification des principaux points de dysfonctionnement à l’origine des pertes – FAO Publication.
Yearbook of Agricultural Statistics (2019)
Analysis of the cereal branch…
same reference.
Our food, our farming, our sovereignty…
جذور سياسات التبعية: في تاريخية امتصاص الفائض الزراعي. هيثم صميدة القاسمي، موقع إنحياز. (من ملفّ <<قمحي لا ينقسم>>)
Or ” Sidi Salem integrated project ” (our food, our agriculture, our sovereignty…)
The amount of water for citrus is estimated at 316 million cubic meters, while dam storage in 2017 is equivalent to 944 million cubic meters against 1400 million cubic meters the previous three years (our food, our farming, our sovereignty …)
تونس: هل تصبح وفرة الحبوب لعنة؟ ندى الطريقي، موقع بر الأمان، جويلية 2019.
Analysis of the cereal branch…
Average quantities supplied 2,097 million quintals and average quantities produced 6,176 million quintals – 1966 Central Bank Report.
Called the “support fund”.
من التعويض إلى الدعم: سيرورة القضاء على السياسة الغذائية الوطنية، وليد بسباس، موقع إنحياز، مارس 2022.
Sécurité alimentaire en Tunisie: “Si l’état n’agit pas, il n’y aura plus de blé tunisien”, France 24.
Analysis of the cereal branch…
With a rate of 42% for Ukraine and 8.9% for Russia. See: كيف تهدد الحرب بين روسيا و أكرانيا الأمن الغذائي التونسي، , Emna Elmornagui, inkifada Site
INS Figures
Tunisie: The deficit commercial frôle les 17 milliards of dinars in fin Juillet 2022. L’écomiste maghrébin.
INS Figures
Central Bank figures
Plunder in the post-colonial era: Quantifying drains from the Global South through unequal exchange, 1960-2018. Jason Hickel, Dylan Sullivan & Huzaifa Zoomkawala.
Provisional results of the state budget performance till the end of June 2022. Tunisian Ministry of Finance.
Same source
Cereal Agency figures
Food trade balance to the end of August 2022. Ministry of Agriculture.
Analysis of the cereal branch…
Sécurité Alimentaire in Tunisie: “Si l’état n’agit pas, il n’y aura plus de blé tunisien”, France 24.
Same source
بشير الكثيري: تونس لديها مخزون من الحبوب ما يكفي لشهر أفريل Express FM Radio
في الأمن الغذائي أولويات: تقلص المشتريات من السلع الغذائية والتقشف يكشف عن نفسه. شراز الرحالي، جريدة المغرب.
Pénuries d’huile végétale: à cause des impayés de l’état, des usines sont en péril. Business News.
Pénuries en Tunisie: cafetiers en équilibre précaire, Manel Derbali, Nawaat.org
أصحاب المخابز يطالبون بصرف مستحقاتهم، جريدة الشروق، 24 جوان 2022.
صندوق النقد وذاكرة الإصلاحات المفقودة: الأسس النظرية للإصلاح الهيكلي، وليد بسباس، موقع إنحياز، ماي 2021.
In a capitalist economy, it is not the economic activity that creates the financial activity, but the financial activity that prepares the ground for the expansion of the market and anticipates the economic activity to pave the way for it. Increasing the supply of money through the credit process stimulates economic mobility. You borrow when you want to start a business, first getting credit and then put the money to work. It is the widespread of money that creates the basic ground for economic expansion. With the privileges they get from the central bank and through retail banking, banks are able to create money out of nothing.” Ali Qadri in “International Financial Institutions, Indebtedness, and War: An Interview with Ali Al-Qadri.”
الغذاء والسوق: في ضرورة تحرير القمح من الاقتصاد الحر. محمد سليم بن يوسف، Inhiyez Website.
نحو السيادة الغذائية: أيّة حلول آنية وأيّ مكان للسيادة النقدية. وليد بسباس Inhiyez Website..
See examples of Eetizez Farms 2 and 3 in Menzel of Bouziane (our food, our farming, our sovereignty…)