Skip to content Skip to Search
Skip navigation

Tunisia debt default could cost country’s banks billions

Ferid Belhaj, World Bank vice president for the Middle East and North Africa Reuters/Amr Abdallah Dalsh
Ferid Belhaj, World Bank vice president for the Middle East and North Africa

A sovereign debt default by Tunisia could cost the country’s banking system billions of dollars, experts say.

Tunisia is suffering a financial crisis that led to it seeking a $1.9 billion loan from the International Monetary Fund (IMF) in exchange for unpopular reforms, including cutting food and energy subsidies.

S&P Global Ratings credit analyst Mohamed Damak said any debt default could hit the banking sector by as much as $4.1 billion to $7.6 billion, or 8 – 14.8 percent of forecast nominal GDP at year-end 2023.

“Our calculations exclude the potential effects of a sharp depreciation of the Tunisian dinar, which might add to these costs,” he said.

The Covid-19 pandemic and prevailing political uncertainty have weighed heavily on Tunisia’s economic activity in recent years. 

According to the IMF, the country’s economic growth is expected to reach 1.6 percent in 2023, while its fiscal and external deficits will likely total a cumulative 13 percent of GDP. 

Speaking at the World Government Summit in Dubai last week, Ferid Belhaj, the World Bank’s vice-president for Mena said there are particular concerns in the Middle East and North Africa region about Lebanon and Tunisia and, to a lesser extent, Egypt and Jordan.

“We have a number of tensions in those countries, including debt levels and high inflation,” Belhaj said.

Tunisia’s cumulative external debt servicing edged up 25.8 percent to over TND1.2 billion ($380 million) on February 10, compared with the same period last year, financial and monetary data released by the Central Bank of Tunisia showed. 

This was almost offset by tourism receipts and cumulative labour income, which grew respectively 74 percent to TND441 million and 10 percent to TND819 million.

Public debt servicing exceeded TND12 billion in the first 11 months of 2022. The overall volume of external debt amounted to almost TND5 billion, according to data from the Finance Ministry.

Tunisia’s economy witnessed growth of 2.4 percent in 2022, as per the National Institute of Statistics, down from the 4.3 percent registered in 2021.

Latest articles

Musicians perform at the Sharjah Ramadan Festival. Retailers offered discounts of up to 75% on local and international brands

Sharjah’s Ramadan retail sales peak at nearly $110m

Ramadan retail sales in Sharjah hit a new record high of AED400 million ($109 million) in 2024, reinforcing the positive outlook UAE companies had ahead of this year’s holy month. Sales jumped 25 percent year on year during the Sharjah Ramadan Festival 2024, which concluded last Saturday, the UAE state-run Wam news agency reported, quoting […]

The UAE wants dialogue to address the ripple effects of geopolitical challenges on global trade

UAE to advance talks on debt sustainability at global event

The UAE’s finance ministry intends to advance discussions on global macroeconomic stability and debt sustainability at the 2024 Spring Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG). The spring meetings will be held in Washington, D.C., from April 15 to 20. The UAE will also promote a dialogue to address […]

A woman buys cooking oil at a market in downtown Cairo, Egypt

EU to provide ‘urgent’ $1bn short-term aid to Egypt

The European Union (EU) will provide €1 billion ($1.1 billion) in urgent short-term financial aid to support Egypt’s economy. The funding is part of the larger €5 billion macro-financial assistance package.  The remaining €4 billion will be released as longer-term assistance over 2024-2027 but is yet to be cleared by the 27-member bloc. The aid […]

Adnoc sought advice from investment banks on buying a significant stake in BP, a media report said

UAE’s Adnoc explored acquiring BP

Abu Dhabi National Oil Company (Adnoc) explored the possibility of acquiring British oil major BP but abandoned the plan as it did not fit into its strategic growth objectives, a media report said.  The talks did not advance beyond the initial stages, Reuters reported, citing informed sources.  The UAE state oil company also sought advice […]