Tunisia

Debt sustainability remains among the top concerns in Tunisia. The government is striving to reduce its foreign debt share by focusing on domestic financing via its commercial banks and the central bank. Nationalism and reduced foreign dependence represent President Saïed’s main political strategy, following Algeria’s state-led economic model, however without the cushion of oil revenues that its neighbor enjoys.  

Reliance on the Central Bank of Tunisia for foreign‑currency borrowing continues, and FX reserves will again be used to settle the last upcoming Eurobond obligation valued at EUR750mn and due in July 2026. Thereafter, debt‑repayment pressures will moderately ease. Hence, 2026 financing requirements will be met largely through domestic borrowing, given Tunisia’s limited access to external funding. However, the government has indicated its intention to tap international markets for almost EUR2bn during 2026, after having refused an IMF offer for a program due to the concessional aspect of the Fund’s loans and the refusal to remove subsidies.  

Tunisia’s fiscal stance remains under pressure even if some improvements are materializing. The fiscal deficit is expected to stand at 5.3% of GDP in 2025 supported by stronger revenues. Yet, the Tunisian budget remains highly vulnerable to external commodity shocks, subsidies represent almost 20% of the government’s budget mostly dedicated to oil and gas imports. 2026 presents risks of worsening as the draft 2026 budget signals renewed spending pressures (+6% from 2025), including higher wages, pensions, and social contributions, alongside a new wealth tax. The administration has announced efforts to fight the 40% youth unemployment, which remains a structural problem. However, its proposed solution depends on increasing public sector enrollment, rather than supporting private sector activity. The increase reliance on domestic financing to sustain the government’s operations not only brings inflationary risks, but also increases the vulnerability of Tunisia’s commercial banks due to its greater exposure to the sovereign, and indebted SOEs. The entire banking sector faces mounting pressure from the sovereign‑bank feedback loop and elevated public debt levels. The sector’s non-performing loans reached 14.7% in Q1 2025, the highest in four years. Banks are increasingly financing the government, crowding out private-sector lending and limiting credit availability for firms and households. 

Since 2019, Tunisia has experienced significant political changes under President Saïed, who was re-elected in 2024 with a large majority. His administration has focused on consolidating governance and pursuing policies aimed at economic independence. While this approach has led to reduced reliance on foreign financial assistance, it has also resulted in modest impacts on certain sectors. However, the results have been modest, with little impact on non‑agricultural and higher value‑added products. Public sentiment remains elevated about economic opportunities and living conditions, with the Tunisian General Labor Union (UGTT) playing a role in advocating for its members.

Looking ahead to 2026, social tensions could intensify, influenced by generational gaps and frustrated economic aspirations, similar to other movements that have taken place in other regions. Tunisia's geopolitical relationships are increasingly oriented towards regional partnerships, particularly with Algeria and Libya, while maintaining more distanced partnership with Western partners.