Tunisia’s budget deficit until the end of July is already well above (+34%) the deficit forecast for the whole of 2020.
Between July 2019 and last July, it worsened by 85% to 5 billion dinars.
As evidenced by the provisional results of the implementation of the state budget at the end of July 2020, this worsening of the budget deficit in Tunisia is the result of a sharp decline in tax revenues and the continuation of the (sharp) rise in expenditure related to both civil servants’ salaries and debt.
Fall in tax revenues
At the end of July 2020, total state revenue stood at 16.5 billion dinars, compared to 18.6 billion at the same date a year ago, a decline of 11.2%.
This decline is mainly the result of an 11.1% drop in tax revenues from 16.6 billion dinars to 14.8 billion between July 2019 and July 2020.
As for non-tax revenues, they went down 12.4% to 1.7 billion dinars.
Tax revenues from income taxes decreased by 2.8% to 5 billion dinars, including 3.3 billion dinars in taxes on wages and salaries (+4.1%).
Revenue from corporate taxes fell by 24.1% to 1.75 billion dinars due to the sharp decline in taxes on oil companies (-47%) to 370.6 million dinars.
Tax revenues from customs duties fell by 12.6% to 649.8 million dinars, while those from VAT fell by 15% to 3.75 billion dinars.
Tax revenues from customs duties dropped by 12.6% to 649.8 million dinars.
Beyond the delays in collection due to the health crisis and lockdown, these declines are fundamentally explained by the collapse of economic activity in the first half of the year and the fall in consumption and foreign trade.
Increasing current spending and sacrificing investment
The total expenditure of the State was 21.3 billion dinars at the end of last July, compared to 21 billion one year earlier (+1.5%).
Management expenses alone increased by 4.2% to 14.4 billion dinars.
In fact, it is the resistance to the decline in wage expenditures that increased by +13.3% to reach 11.15 billion dinars and representing 77.5% of total operating expenses of the State.
Similarly, spending on “debt interest” increased by 7% to 2.35 billion dinars at the end of July last year, compared to 2.2 billion dinars a year earlier, including 1.25 billion dinars relating to domestic debt.
These two items of expenditure accounted for 80% of the State’s total operating expenditure this year, which is behind the continued growth in public expenditure.
Moreover, the sacrifice of public investment continues. Indeed, out of the 21.1 billion dinars of expenditure at the end of July, the State has spent only 1 billion dinars on direct investment (-24%), or barely 4.5% of its total expenditure, compared to an average of 7% over the last 5 years.
If this trend continues, total state spending is well on its way to representing nearly 38.8% of GDP and wages more than 18% of GDP at the end of the current year.
As for the budget deficit, it should be close to 10% of GDP.