Smuggling will weigh on Tunisian economy and politics

Significance

Essid has been working to form a new coalition government since general elections in late December. The new unity government will face tremendous pressure to jumpstart the economy, ensure political stability, and counter growing security threats. One major challenge -- cross-border smuggling -- poses a particularly serious threat to the new government. Smuggling costs the government some 615 million dollars per year, representing nearly 5% of total tax revenues, and undermines legitimate trade, further damaging growth.

Impacts

• If the government fails to address smuggling, it will continue to lose critical revenue.
• Yet cracking down on smuggling will probably meet with considerable opposition -- particularly in rural areas and border towns.
• The new government's lack of a decisive mandate will impede reforms.