Event

The assassination on February 6 of Chokri Belaid, a secular-minded opposition leader, had a far-reaching impact on Tunisia’s political landscape. During  the days following the event, thousands of people took to the streets against the government, which is headed by the moderate Islamist al-Nahda, a party that was regularly criticized by Mr Belaid for failing to keep under control increasingly violent Salafist activity in the country. PM Jebali, who headed the ruling three-party coalition between his al-Nahda, left-leaning Ettakol and the liberal Congrès pour la République, resigned after his proposal to form a technocratic unity government had failed. Interior Minister Ali Larayedh, who is seen as a hardliner within al-Nahda, was appointed as his successor on 22 February. He now has two weeks to form a new government. If he succeeds, this cabinet will particularly be occupied with drafting a new constitution ahead of fresh parliamentary and presidential elections which were so far scheduled for June and July, organizing them peacefully and tackling the sluggish economic performance of the country.

Impact on country risk

The events of the past month have shown that the post-revolution political transition in the country remains very fragile. If the PM designate succeeds in forming a new more broadly supported government, protests may dilute somewhat, but political uncertainty can be expected to continue until the organization of new elections. While the government headed by PM Jebali scheduled the elections for June and July, it remains to be seen whether the schedule will now be maintained, as a new constitution needs to be adopted first, a difficult task which the Jebali-government had so far failed to agree on. Meanwhile, a new government is likely to be confronted with continuing socio-economic discontent, with an economic performance that is likely to suffer from the events of the past month because political instability hits tourism and investments, two major sources of revenues for the country. On the positive side, prior to the turbulent past month, the risk  of  a balance of  payment crisis  in the short  term  had eased somewhat as foreign exchange reserves had jumped by almost 30% last December, according to the Tunisian Central Bank. While reserves had been dwindling over the past two years, covering even slightly less than three months of imports during the second half of 2012, they were boosted late last year by direct investments and the disbursement of international budget support, to a level not seen since the first months of the revolution in early 2011, again surpassing the critical threshold of covering three months of imports.

Analyst: The Risk Management Team, r.cecchi@credendogroup.com