What is the impact on the Tunisian economy?

AA / Tunis / Majdi Ismail

Wheat, grain at the heart of power, important food security products and flagship production in the world, oil, all the objects of desire are by-products of war, the thread of Ariadne that can cause and explain conflict. .. The balance of power among international powers, as evidenced by the soaring prices of “black gold” and “yellow gold” in the first few days of Russia’s military intervention in Ukraine.

For Tunisia, already weakened by the effects of debt and Covid-19, it is a matter of “managing” the butterfly effect of the crisis in Eastern Europe, and it is not without its economic implications.

Russia’s military intervention in Ukraine is still underway, especially fueling concerns about the supply of hydrocarbons from Russia and causing soaring prices for black gold. Russia is the second largest oil exporter in the world.

Inflationary pressures increased in some countries as oil prices began to rise again after OPEC + exporters, especially Saudi Arabia and Russia, decided not to increase production any further.

Last Wednesday, the Brent North Sea rose 5.78%, peaking at $ 111 after reaching its highest level since 2014 at $ 113.94. The upward trend continues to reach even higher levels. Tuesday, March 7, 2022, $ 130 per barrel.

Oil prices are not the only ones that have skyrocketed at the pace of Russia’s “special military operations” in Ukraine. The wheat one also exploded. The surge in the agricultural raw material market is explained by the weight of Russia and Ukraine in global wheat production. These two countries alone account for nearly 30% of the world’s wheat production. Russia is one of the world’s leading producers of soft wheat, and Ukraine is the fourth, accounting for about 12% of the world’s wheat exports. Prices for some basic necessities could explode in the coming months.

On February 24, when the conflict between Russia and Ukraine broke out, wheat prices already broke historical records in the European market and peaked at $ 450.50 per ton (€ 316.50) by the March 2022 deadline. ..

Obsessed with the crisis in Russia and Ukraine, wheat milling prices closed on Monday, February 28, with a new record in the European market of $ 459 per ton (€ 322.50) by the March 2022 deadline.

-Tunisia relies on grain imports

Despite its “ambiguous” position on the conflict between Moscow and Kyiv, Tunisia, which initially showed neutrality before deciding to support the withdrawal of Russian troops from Ukraine, escapes the effects of the current crisis. You can not. This is called the “butterfly effect”.

According to data on the geographical distribution of imports and exports published on the website of the Ministry of Commerce of Tunisia, Tunisia has a product equivalent to 1,498.3 million Russian dinars ($ 511.1 million, 2.4% of total imports) and 100 million. We import 38.5 million dinars from Ukraine. ($ 471.6 million, or 2.2% of total imports).

Therefore, Tunisia is heavily dependent on grain imports. These should average 3.7 million tonnes in the 2021-202 commercial year.

Wheat accounts for almost half of all grains imported by Tunisia and is mainly imported from two suppliers, Ukraine and Russia.

The country has produced 1.6 million tonnes of grain over the past year, less than half of the country’s requirements. In 2019, Ukraine’s imports accounted for nearly 47.7% of Tunisia’s wheat imports, while Russia’s imports accounted for 3.97%.

-Negative impact

According to economist Alam Belhadj, the crisis in Russia and Ukraine will inevitably have a negative impact on the commercial, economic and financial levels.

At the commercial level, Tunisian experts explain that “rising oil prices, where Brent peaks above $ 110, will affect the overall range allocated to state budgets and subsidies. The selling price of fuel in pumps determined by the Tunisian government and its followers. “

According to Belhadj, Tunisia’s trade deficit will be even more valuable given that Tunisia imports a significant portion of its energy demand.

Demand for these two raw materials is increasing as most countries seek to secure oil and wheat supplies during the military conflict in Ukraine.

The disruption of the logistics flow across the Black Sea and the lack of delivery panicked the market and pushed up the prices of black and yellow gold.

-Price soaring

“As long as the conflict continues, it will lead to higher prices for black gold and increased demand for oil, thus leading to a budget deficit that should grow further, especially at the risk of handicap,” Belhadj emphasized. .. Even after the hostilities in Ukraine have ceased, the long-term impact of the conflict on Tunisia’s finances will be significant.

Regarding the impact of the crisis in Eastern Europe on the exchange rate in Tunisia, economic experts explain that the collapse of the ruble (Russian currency unit) against the US dollar will lead to a new rise in the greenback of the foreign exchange market. Taking advantage of its position as a “safe shelter” in the worried market, to other currencies.

Marouane Abassi, Governor of the Central Bank of Tunisia (BCT), declared on Tuesday, March 1, that Russia’s military intervention in Ukraine would not affect the country’s exchange rate for the time being.

However, the Tunisian dinar exchange rate has fallen 7% against the US currency, says Belhaj (on the same day in 2021, the dollar was exchanged at 2.904 dinar on January 27, 2022, which was worth it. The continued conflict between 2.709 Dinar) and Ukraine will increase demand for the US dollar, effectively causing a further decline in Tunisian dinar, at least against the greenback.

-Affected growth

Economically, it goes without saying that conflict affects the pace of growth. Tunisia’s economists have predicted slowing growth in Europe and rising interest rates at the European Central Bank, given the sharply increased inflation surge, which will ultimately affect Tunisia.

“The pace of sustainable growth will be disrupted. As a result, growth could drop to 3.5%, but is now 5.5%. Slow growth in Europe will impact Tunisia’s economy and finances. Inflation will accelerate further and the BCT will be forced to raise its key interest rates, “Belhaji emphasizes.

For Houkine Dimassi, an economist and former Tunisian finance minister, the latest rise in fuel prices in Tunisian pumps, decided on Monday, February 28, is a turmoil in the global oil market where Brent has crossed the 100 threshold. Explained by. Dollar per barrel under the influence of the conflict between Russia and Ukraine.

“The government is obliged to raise fuel prices upwards to some ease compensation for hydrocarbons, which is about 40% of the range allocated to subsidies,” Dimash said.

The former Treasury Minister explained that an increase of $ 1 per barrel would create an additional demand for funds of 130 million dinars ($ 44.35 million) annually.

“If the average price per barrel in 2022 remains at $ 100, especially the government will set the average price per barrel to about $ 75 in the state budget for 2022,” he said.

-Laminated purchasing power

Economists warn that this rise will have a negative impact on socio-economics and believe the situation is even more significant in anticipation of other rises in hydrocarbon prices this year.

On the economic side, Dimash evokes the domino effect, given that rising fuel prices lead to higher production costs for companies, resulting in higher product prices.

At the social level, the former Minister has given specific examples of the impact of rising fuel prices on pumps on private and public transportation: Private and public transport prices are already declining in purchasing power. “

-No worries about wheat

Regarding wheat supply, Abdel Harim Gesmi, director of research and agricultural development at the Ministry of Agriculture, Fisheries and Fisheries of Tunisia, was convinced that Tunisia had already purchased wheat from suppliers and could meet national needs (nationwide). Wheat requirements fluctuate between 28 million and 30 million quintals annually until the next wheat harvest, which begins in early June.

“We have an unmanageable two-month strategic inventory and another inventory that is used to cover our daily national needs. There is no reason to worry about supply.” Stated.

According to him, the only scenario that raises the issue is that the conflict between Russia and Ukraine will continue. “Prolonged conflicts incur additional costs, such as disruption of traffic in the Black Sea, delays in delivery, and higher sea shipping prices (shipping prices for goods),” he said. He said.

Gesmi also said that Russia could withhold yellow gold to maintain its inventory, and Ukraine’s infrastructure (railroad network, roads) was severely damaged, from the center of the country to the port of Odessa. It will be loaded onto a ship departing for all parts of the world.

Tunisia imports 95% of the soft wheat used to make bread, producing only 5% (500,000 kintal) locally. For durum wheat used in the production of pasta, 80% of consumption is secured by local production, according to the National Farmers’ Group of the Tunisia Citizens’ Federation (CONECT AGRI).

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