Cash-Tight Tunisia Snubs Qatari Aid Plan as Risking Independence

(Bloomberg) -- Tunisia’s parliament barred a state-run Qatari fund from expanding into the cash-strapped North African country, a potential setback for efforts to revive the economy and stave off default.

Lawmakers aligned with President Kais Saied led the charge against the proposal for the Qatar Fund for Development to open a Tunis branch. Approval was key for the swift release of some $150 million in immediate financing and to pave the way for additional support from the wealthy Gulf nation.

In Tuesday’s heated debate, opponents variously described the mooted office as “booby-trapped,” a threat to national sovereignty and counter to Saied’s stated policy of self-reliance. Others connected it to alleged Qatari support for Islamist politicians, including the Ennahda party that once led the assembly and some of whose members have been jailed since Saied assumed greater powers in 2021.

The North African nation, dogged by sluggish economic growth and high youth unemployment, has been struggling to reconcile its debt obligations with a need for public investments. After the stalling of a $1.9 billion rescue deal with the International Monetary Fund, authorities are seen as increasingly likely to turn to Arab nations to meet funding needs estimated at 28 billion dinars ($9 billion) this year.

The rejection is “a setback” but probably part of the regular ebb and flow of Qatar-Tunisia relations since the Arab Spring revolts of 2011, according to Mark Bohlund, senior credit research analyst at REDD Intelligence. Tunisia’s strong relations with Algeria and Saudi Arabia make them possible alternative sources of finance, he said.

Tunisia’s dollar bonds have rallied since November. But their spread is still close to 1,000 basis points above US Treasuries, a level considered distressed by many traders.

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