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FACTBOX: Signs of a Tunisian economy in trouble

Person, Human, Crowd REUTERS/Zoubeir Souissi/File Photo
People carry banners and flags during a rally in support of Tunisian President Kais Saied in Tunis, Tunisia May 8, 2022

Public finances are under strain and prices are soaring in Tunisia, presenting big economic challenges to President Kais Saied as he plans to overhaul the political system in a constitutional referendum on Monday.

Here are some of the troubles affecting the economy, which was hit particularly hard by the COVID-19 pandemic due to its reliance on tourism:

Government finances

Strains on Tunisia’s public finances have led to delays in state salaries and difficulties in paying for wheat imports.

The budget deficit is expected to widen to 9.7 percent of GDP this year from a previously forecast 6.7 percent, central bank Governor Marouan Abassi has said. This is due to a stronger dollar and sharp rises in grain and energy prices – knock-on effects of the Ukraine war that Abassi has said have generated an additional $1.6 billion of financing needs.

State finances were already stretched by one of the highest public sector wage bills in the world compared to the size of the economy, and heavy spending on imported energy and food subsidies.

A weaker Tunisian dinar has added to the pressure. The currency weakened to 3.18 dinars to the dollar in the 12 months to July 14, a 13.2 percent decline.

The government hopes to secure a $4 billion IMF loan in exchange for freezing public sector wages and recruitment and cutting food and energy subsidies. But the powerful UGTT labour union opposes the reforms, a significant obstacle.

Debt seen more risky

The IMF said last year that Tunisia’s public debt would become unsustainable unless reforms were enacted with broad support.

Tunisia’s outstanding public debt will reach nearly 114.14 billion dinars ($40 billion) by the end of 2022, accounting for 82.6 percent of GDP, according to the 2022 state budget, an increase from 81 percent in 2021.

Reflecting investor concern, spreads on Tunisian public debt – or the premium investors demand to hold it rather than ultra-safe US government bonds – are now some of the highest in the world.

They have risen to over 2,800 basis points, almost three times the 1,000 level that normally sets off the warning sirens.

Along with Ukraine and El Salvador, Tunisia is on Morgan Stanley’s top three list of likely defaulters.

Some $3 billion worth of Tunisian foreign currency debt is set to mature between 2024 and 2027.

Frozen out of international markets, the government hopes an IMF funding agreement would unlock wider financial support.

Tunisia’s President Kais Saied. Fethi Belaid/Pool via REUTERS/File Photo

Inflation climbing

Tunisia’s annual inflation rate has hit a series of record highs this year, touching 8.2 percent in June.

The government has raised petrol prices three times this year. It now costs 100 dinars to fill a typical four-door saloon compared to 93 dinars at the start of the year.

In May, farmers in several areas protested at the high cost of animal feed, and the government said it would raise the prices of some foods including milk, eggs and poultry.

Tunisia is particularly vulnerable to grain supply disruptions caused by the Ukraine war, importing 60 percent of its soft wheat and 66 percent of its barley from Russia and Ukraine, the World Bank says.

In June, the World Bank approved a $130 million loan for wheat and barley imports.


Hardship is on the rise. In an interview with a local newspaper in May, the social affairs minister said the number of families in need had grown from 310,000 in 2010 – the year the pro-democracy uprising began – to more than 960,000 today. Close to 6 million Tunisians, or half the population, are under the poverty line, he added.

Unemployment is high, hitting 18.4 percent in 2021, the World Bank says. It is particularly high among youth, women and in the west of the country.