Stalling without falling (for now)

Economic stagnation in 2023 with an estimated +0.9% GDP growth is forecast to be followed by +1.8% growth in 2024 as a result of stalling negotiations with the IMF, political turmoil, sluggish growth in Europe (Tunisia’s main export partner) and a prolonged tightening cycle across advanced economies.

Concerns about debt sustainability will accompany Tunisia at least until 2026, since around 52% of the Tunisian public debt comes to maturity between 2024 and that year. The sum of the current account deficit and external debt repayments maturing in the next 12 months is forecast at around USD5bn, with international reserves standing at USD8.1bn as of October 2023 (equivalent to eight months of 2023 imports). This means that a depletion of reserves throughout the year is likely should negotiations with international lenders keep stalling, but a default should not materialize even without rapid IMF support. Tunisian authorities managed to repay Eurobond maturities in 2023 (USD166mn in yendenominated guaranteed bonds in August and EUR500mn in euro-denominated bonds in October) as repayments were stipulated in the 2023 Budget Law. A EUR850mn Eurobond is maturing in February 2024, representing almost half of the total amount of sovereign debt maturing in the year. Therefore, the balance of payments will remain under pressure as long as external financing remains limited and the current account posts a deficit even under persistent import restrictions.

The economic and social turmoil in Tunisia, the cradle of the Arab Spring pro-democracy movement more than a decade ago, has only increased since President Kais Saied seized power, began cracking down on his opponents and suspended the Parliament in July 2021. In July 2022, a new constitution came in, which gave almost absolute power to the president. In March 2023, the first session of Parliament took place after legislative elections highlighted recordhigh abstention rates on both rounds on the back of calls for a boycott from opposition parties. Elections to the new second chamber of parliament were held on 24 December 2023. Opposition parties boycotted the poll, and turnout was once again minimal. Official participation numbers in the referendum to accept his new constitution (30%), a new parliament with reduced powers (11.2%) and the December municipal elections (11.6%) have all been gravely low. Under the new constitution introduced by President Saied, the latter election serves to put in motion a parliamentary chamber that will aid in government spending and regional development initiatives. The poor turnout is clearly frustrating President Saied’s efforts to legitimize his authority.

Moreover, public statements by President Saied against Black communities raised tensions across the country as well as with Sub-Saharan partners and multilateral lenders. An increasing flow of migrants from Tunisia has also accompanied the government’s quest for a normalization of diplomatic relationships with Europe and negotiations for further financial assistance. The arrest of former parliamentary speaker and opposition leader Rached Ghannouchi in April 2023 confirmed that the clampdown on civil liberties is far from over, and this is likely to alienate donors and multilateral institutions for a long time, as well as increase reputational risk for companies dealing with Tunisian entities associated with the regime.