Tunisia repays 74% of debt to ease default fears

Reuters/Jihed Abidellaoui

• $2bn repaid by September 10
• No progress on IMF loan talks
• Country given ‘junk’ rating

Tunisia has repaid 74 percent of its cumulative external debt due this year, defying predictions that the country is heading towards a default.

As of September 10, the amount of debt repaid was TND6.6 billion ($2 billion), compared with TND8.9 billion forecast for the year in the 2023 budget, as reported by Agence Tunis Afrique Presse.

Citing data from the country’s central bank, it revealed that the cost of servicing the external debt was covered by tourism receipts and remittances from expat Tunisians and totalled TND10.7 billion.

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Net foreign exchange reserves were up to TND26.4 billion – the equivalent of 116 days of imports – on September 15, compared to TND23.7 billion on the same date in 2022.

Tunisia’s net external financing dropped from TND3.4 billion at the end of June 2022 to TND933 million at the end of March 2023, according to data published by the Ministry of Finance.

The decline was attributed to a general fall in foreign loans, while tax revenues were up 8.3 percent and budget expenditures grew by no more than 7 percent.

This resulted in a surplus of TND58.8 million at the end of June 2023.

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 on which a loan from the IMF is conditioned. 

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. 

Bailout talks with the IMF 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 fuelled speculation over an imminent default on the country’s debt.

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 – and $100 million as a grant. 

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