In 2020, Tunisia’s external debt accounted for 97.2% of GDP, the highest rate in North Africa, according to the estimates of the 4th edition of the report “North African Economic Outlook 2021 / Debt Dynamics: The Road to Recovery Post-COVID”, published by the African Development Bank (AfDB).
Presented at a webinar held on Wednesday, the report highlights that Tunisia remains more vulnerable to exogenous shocks than other North African countries due to its high dependence on external debt which increased by 42.4 points between 2012 and 2020.
As for public debt, the bank warns that it will become “unsustainable” if Tunisia does not undertake solid and credible reforms with broad domestic support.
Gross public debt could reach nearly 100% of GDP
In the absence of a credible framework of reforms, the gross public debt should reach nearly 100% of GDP in the medium term, the same source estimates.
It added that the risks related to debt sustainability are aggravated by financing risks, the overvaluation of the real effective exchange rate and contingent liabilities (government liabilities that become due) and guarantees of public enterprises.
According to the report, in 2020, gross public financing needs would remain in a high range of 14 to 18 percent of GDP on an annual basis, the report’s authors point out, adding that public debt, 70 percent of which is external, exceeded 80 percent of GDP in 2020, continuing the worrisome upward trend that began in 2011.
Debt service costs absorb 28% of the budget, which limits other development spending, the same source said.
As for public enterprises, their financial difficulties are another concern, the African financial institution laments, noting that their debt represented 13% of GDP in 2019.
The important state guarantees, not audited
According to the AfDB, these companies that benefit from “important guarantees not yet cleared”, represent significant budgetary and financial risks, adding that 30% of them show a stock of debts of nearly 40% of GDP, 20% of which are due to banks and suppliers and the rest to social security funds, other public enterprises and the government.
“As of mid-2020, these public enterprises have received government guarantees estimated at 15 percent of GDP.
If the debt of state-owned enterprises is added to that of the central government, the total public debt would be well over 100 percent of GDP,” the same source points out.
To improve public debt management and strengthen domestic resource mobilization, Audrey Verdier-Chouchane, regional economist for North Africa, emphasized the need to put in place mechanisms and institutions that balance the benefits and costs of additional debt.
She also called for better debt transparency and careful monitoring of contingent liabilities, emphasizing the need to restructure SOEs and use debt effectively to finance productive investments.