Tunisia is stuck in a grinding economic crisis that has seen inflation hit 10.4 percent and unemployment reach 15.2 percent

Tunis (AFP) - The World Bank has effectively suspended new lending to cash-strapped Tunisia after President Kais Saied sparked accusations of racism with incendiary comments against sub-Saharan African migrants.

Migrants from sub-Saharan Africa have faced a wave of violence in the country and many hundreds have been made homeless in the two weeks since Saied ordered “urgent measures” against them, claiming without evidence that their presence represented a “criminal plot” to change the country’s demographic make-up.

In response, the World Bank’s outgoing President David Malpass told the body’s staff in an email on Sunday evening that the institution had indefinitely postponed a key board meeting on Tunisia, saying Saied’s tirade had triggered “racially motivated harassment and even violence”.

Tunisia is stuck in a grinding economic crisis that has seen inflation hit 10.4 percent and unemployment reach 15.2 percent, according to the latest official figures.

- What is the immediate impact for Tunisia? -

Top World Bank officials had been set to meet on March 21 to discuss the body’s “Country Partnership Framework” laying out priorities in Tunisia until 2027.

Malpass said that meeting had now been “postponed until further notice”.

A World Bank official, who asked not to be named, said it was unlikely any new funding would be approved until the “situation is clarified” and the framework agreed.

Tunisian economist Ezzeddine Saidane said the lender’s move would have “a very bad impact on Tunisia’s financial situation”.

The North African country is heavily indebted and needs to borrow billions of dollars more to balance this year’s budget.

“The World Bank’s absence will make this very difficult and complicated,” Saidane said.

“The question now is how Tunisia will finance its public spending and reform programmes?”

- Will the move affect an IMF deal? -

Tunisians have endured years of mounting economic pain, made worse by the coronavirus pandemic and the fallout from Russia’s invasion of Ukraine.

The country has been in talks since 2021 with the World Bank’s fellow global lender, the International Monetary Fund, for a $2-billion bailout loan.

Those negotiations, partly dependent on funding from the bank, could now be pushed further down the line.

The official told AFP that “now that the World Bank has done the right thing” in response to the migration row, the IMF would face pressure not to approve a bailout.

“The IMF might be reluctant to approve a deal that was controversial to start with, especially now that another big Washington-based lender is retreating,” the official said.

- What happens now? -

The Tunisian government has yet to respond directly to the World Bank’s move.

Saidane said it was vital that authorities “find a way to turn a page on this affair and rebuild trust with international financial institutions”.

“This will depend on the government’s reaction,” he said.

Malpass said in his email that the lender would “remain fully engaged” in Tunisia, and stressed that the safety of its many sub-Saharan African staff was a priority.

Meanwhile, talks on World Bank funding for Tunisia – notably a 20-million-euro ($21-million) loan to help build a cable to export solar power to Europe – are on hold.

“It’s unlikely that new projects will be approved until after the Country Partnership Framework is approved,” the World Bank official said.

“The more this drags on, the more funding Tunisia will lose.”