As access to external financing became more limited, the nominal domestic debt stock rose rapidly over the past few years, moving from 24.7 billion in 2019 to 66.4 billion in August 2024, the World Bank said in its Tunisia Economic Monitor Fall 2024 entitled “Equity and Efficiency of Tunisia Tax System.”
The document said public debt public debt grew rapidly from 67.8 percent to 80.2 percent of GDP between 2019 and 2024, reflecting rising public expenditures and the deceleration of the economy.
As a result, Tunisia has increasingly tapped into local markets as a financing source so that the share of domestic debt in total debt increased from 29.7 percent in 2019 to 51.7 percent in 2024.
“This domestic financing necessitated a high level of refinancing to local banks by the Central Bank,” the World Bank underlined.
According to the World Bank report, the injection of liquidity through refinancing operations is directing bank liquidity towards government lending, which is likely to crowd out credit to the rest of the economy.
In the last 24 months through May 2024 the banking sector’s exposure to the State grew at an annual rate of 30 percent.
As a result, the share of central government in total claims of the banking sector increased from an average of 14.4 percent in 2015 to 25 percent in the last 12 months up to May 2024.
“In a context of limited credit growth, this rising share of claims to the government has displaced the credit to the rest of the economy, which decreased at an annual rate of 3.8 percent between June 2022 and May 2024,” said the document.
It added that this displacement is aggravated by the increasing banking exposure to SOEs, as it is the case of the Banque Nationale Agricole (BNA), one of the largest Tunisian banks, which increased its credits to the Office Des Céréales (OdC) three-fold between 2019 and 2024. The OdC now accounts for almost a third of all BNA credits.
“In this context implementing some of the measures proposed in the 2022 government’s emergency plan, such as facilitating the use of movable assets as collateral, could be important to strengthen access to credit to the economy,” the World Bank said in conclusion.
