Tunisia's Economic Challenges

Dec. 30, 2011, 2:18 p.m.

The Carnegie Endowment published a paper on the economic underpinnings of revolution in Tunisia. The paper explores how high unemployment among the youth, a high number of marginal jobs, growing income inequality, and regional disparity led to the overthrow of the Ben Ali government. The paper provides suggestions for the current government to overcome the problems. The paper can be found here.

As the country moves away from its former regime, policymakers need to build the confidence of citizens in the ongoing democratization process and set the foundations for the rule of law and good governance. The newly elected government should devise a consistent package of policies, relying on a credible discourse, concrete goals, a timetable to achieve them, and accountability to the population.
Striking a delicate balance between efficiency and social justice in economic policy and between a favorable investment climate and transparent incentive programs will no doubt be challenging. Tunisia’s elected government will not have much room to maneuver and increase public investment because a large part of the budget is absorbed by nondiscretionary spending. It will also need to keep both the public deficit and debt under control. In the current international context, the country’s excessive level of public debt may only weaken investors’ confidence and hurt growth prospects. The private sector is therefore essential for Tunisia’s economic future. The newly elected government must promote private-sector development by removing inefficient regulations and fighting corruption. Instead of rents for patronage, the government needs to offer appropriate incentives based on economic efficiency and social justice.

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