Tunisia Appears to Have Temporarily Avoided Financial Bankruptcy Scenario
Tunisia seems to have taken a step back, at least temporarily, from the financial bankruptcy scenario that was predicted for 2023. Thanks to a series of honored repayments and an upgrade of its sovereign rating, the country is breathing a sigh of relief. However, behind these positive signals, the structural weaknesses of the Tunisian economy remain intact.
On September 12, the Fitch Ratings agency upgraded Tunisia's rating from CCC+ to B-, an improvement that reflects an increased ability to honor its long-term financial commitments. This decision follows that of the Japanese agency R&I, which had already revised its outlook from "negative" to "stable" in August. These announcements mark a turning point, especially considering that in 2023, Tunisia was on the brink of default after President Kaïs Saïed refused to accept the conditions of the IMF for a $1.9 billion loan.
The reasons for this renewed confidence are multiple. Firstly, Tunisia has successfully repaid its recent debt maturities, including a $700 million eurobond loan due in 2026. Its foreign exchange reserves, although under pressure, remain sufficient to meet short-term commitments. The current account balance has improved thanks to tourism revenues, olive oil exports, and remittances from Tunisians abroad, which have increased from 4% to 6% of GDP between 2018 and 2024. At the same time, the budget deficit is trending downward, from 6.3% in 2024 to 5.3% in 2025, with a projected 4% in 2027.
However, this apparent recovery is based on temporary and costly solutions. In the absence of an agreement with the IMF, Tunisia had to seek alternative financing: $1.7 billion from the African Import-Export Bank, as well as $1.2 billion from Algeria and Saudi Arabia. The Central Bank has also been forced to inject 7 billion dinars directly into the state budget, a mechanism qualified as "magic money," which carries inflationary risks.
Austerity is also at the heart of the government's strategy. Freezing hiring, limiting wage increases, reducing imports, and cutting subsidies have made it possible to generate repayment margins. However, these choices have led to shortages of basic products, power outages, and increased dependence on Algeria for energy supply.
In the background, structural challenges persist: a public debt that reaches 84% of GDP, unreformed public enterprises, and a productive sector that is losing momentum. The country remains vulnerable to any external shock, whether it be a surge in global prices or an economic slowdown in Europe.
If the threat of default is receding, the assessment remains bitter for experts. "Tunisia has defaulted on its future," summarizes Hamza Meddeb, of the Carnegie Middle East Center. Between imposed austerity, brain drain, and lack of deep reforms, current financial stability does not guarantee sustainable prosperity.
