Skip to content Skip to Search
Skip navigation

Tunisia teeters on the edge over mounting debt

Tunisian President Kais Saied meets with Saudi minister of finance Mohammed al Jadaan. Reuters
Tunisian President Kais Saied meets with Saudi minister of finance Mohammed al Jadaan. Saudi Arabia has provided a $400m soft loan to Tunisia
  • $2bn debt matures in 2023
  • Deficit is 8.6% of GDP
  • Downgraded by Fitch to CCC-

Saddled with mounting levels of debt and dwindling foreign reserves, Tunisia is intensifying concerns over its deteriorating public finances.

Bailout talks with the International Monetary Fund have stalled since last October when a preliminary agreement for a 48-month loan worth close to $2 billion was reached.

Tunisian president Kais Saied’s government refused to accept the terms of the proposed deal which is leading some experts to predict that it is now only a matter of time before the country defaults on its debt. 

“We think that Tunisia is heading toward a sovereign default,” James Swanston, Middle East and North Africa economist at Capital Economics, told AGBI

“We have long forecast that Tunisia would run into trouble in 2023-24 as there are large foreign currency debt principal repayments due in the final quarter of this year and first quarter of 2024.”  

Tunisia’s external debt maturities comprise $2 billion in 2023, including a €500 million ($535 million) Eurobond in October, and $2.6 billion in 2024 which includes an €850 million Eurobond in February. 

A low level of foreign exchange reserves and lack of an IMF deal mean Tunisian authorities have little ammunition with which to service repayments and also continue to prop up their domestic currency, Swanston said.

“Tunisia is not in a position to try and roll over its debts,” he added, noting how sovereign dollar bond yields are still trading above 20 percent.

Other experts are more optimistic about Tunisia’s near-term outlook.

“The overall debt profile implies sustainability over the rest of 2023,” François Conradie, lead political economist at Oxford Economics Africa, said in a research paper published last month. 

However, he cautioned that the punishing interest rate environment and persistence of a wide fiscal deficit will make restructuring a greater threat going into next year.

Borrowing concerns

According to the latest available figures, Tunisia’s current account deficit stood at 8.6 percent of GDP at the end of 2022. 

Conradie said the Tunisian sovereign’s ability to borrow abroad is a concern as commercial foreign lenders have become hesitant to take up the country’s bonds.

Ratings agency Fitch in June downgraded Tunisia’s rating further into junk territory, citing concerns over its refusal to commit to the reforms of its subsidies, state-owned enterprises and the civil service that the IMF loan is conditioned on. 

It revised the country’s long-term foreign currency issuer default rating from CCC+ to CCC-, which is seven levels below investment grade.

Junk status makes it more difficult for a country to gain access to capital markets and raise funding, and indicates that default is possible. 

Conradie said that the risk of Tunisia defaulting on its debt is “not unavoidable,” and pointed to the fact that the country’s reserves, which stood at almost $8 billion at the end of June, are ample to meet its obligations. 

Yet drawing on its reserves would apply pressure on Tunisia’s external position.

“For this reason, and because Tunisia is locked out of capital markets, there is an urgent need to obtain more loans from abroad on a bilateral basis – and the sooner the better,” he said. 

“Even if this is only a stopgap measure, Tunisia needs to narrow its current account deficit.” 

Saudi Arabia in July announced it would provide Tunisia with $400 million as a soft loan – one with no interest or a below-market rate of interest – and $100 million as a grant. 

Riyadh has pledged more financial support in the near future but this has yet to materialise. 

“The Tunisians have also been very busy talking to the Emiratis and I think that they are willing to help,” Conradie said. 

“They just want some pledges in return that Saied will start normalising relations with Israel, which he is being obstreperous about. 

“There is now a very big push for that, and I think that if he starts moving in that direction, then he will receive Emirati money too.” 

Latest articles

Flooding in Dubai affected many people's homes. Emaar has promised .free repairs for its residents, and an upgraded sewerage system is planned

Emaar promises free repairs as Dubai launches sewerage system

Emaar Properties is offering free repairs to residents whose homes were damaged during this week’s extreme flooding, as Dubai also announced an AED80 billion ($22 billion) sewerage system. The developer announced on Friday that it would repair all homes in its communities affected by the historic levels of rain, “at no cost to residents”. Emaar’s […]

Construction work in Kuwait. Nurseries, schools and shops are being built for the new residential district of Al Metlaa

Kuwait signs $140m contracts for Al Metlaa development

Kuwait’s Public Authority for Housing Welfare (PAHW) has signed two contracts worth KD42 million ($140 million) to construct public buildings in Al Metlaa, a new residential district north of Kuwait City. Nurseries, stores, schools and shops will be included, state news agency Kuna reported. Electricity connections have been provided for 109 buildings in the district, […]

Iraq gas oil

Iraq to auction 30 oil and gas projects this month

Iraq will auction 30 new oil and gas projects in two licensing rounds before the end of April. The bidding round will be held on April 27, Reuters reported, citing an oil ministry statement. Last October Iraq passed a long-awaited oil and gas law, which will help the country attract more international investments into the hydrocarbon industry and boost government revenues.  Ali Metwally, an […]

Workers at Cano Limon oil field in eastern Colombia. Oil is one of the country's largest exports

UAE strikes Colombia deal to strengthen Latin American links

The UAE has strengthened trade relations with Latin America after signing a comprehensive economic partnership agreement with Colombia, just days after a Cepa deal was struck with Costa Rica. Officials from the UAE and Colombia put pen to paper on an agreement that will cut tariffs and remove trade barriers between the two countries. UAE […]