The European Union announced on Tuesday that it would lend Tunisia 450 million euros ($500 million) to support its budget as the North African country faces a looming public finance crisis for which it seeks an international bailout.
Speaking after a meeting with Tunisian government officials in Tunis, EU Enlargement Commissioner Oliver Varhelyi said the money would be sent by April and included 300 million euros allocated last year .
Rating agency Fitch downgraded Tunisia’s sovereign debt to junk status this month and investment bank Morgan Stanley said it expected the government to default on its loans.
Tunisia’s public finances were already stretched before the pandemic and political unrest since President Kais Saied suspended parliament and moved to a one-man government last year has delayed efforts to seek additional aid.
The war in Ukraine has compounded government problems, causing the prices of fuel and grain, both of which are subsidized in Tunisia, to rise.
The impact of these price hikes on Tunisia’s budget will be just under 5 billion dinars ($1.7 billion) this year, Economy Minister Samir Saied told Reuters.
Varhelyi also said the EU has allocated 200 million euros to Maghreb countries – which also include Algeria and Morocco – to help ease the impact of grain shortages resulting from the Ukraine crisis.