To address Tunisia’s debt burden and restore fiscal sustainability, Tunisia should prioritize a mixed strategy focused on gradual fiscal consolidation combined with enhanced revenue mobilization. This is the key conclusion of a newly published policy brief by the Tunisian Economists Association (ASECTU).
The brief, entitled “Post-COVID Public Debt: Tunisia Facing the Urgency of Fiscal Consolidation”, prepared by economist Hela Ben Hassine Khalladi, states that “with debt at 85% of GDP, Tunisia has exhausted its fiscal room for maneuver. Without a radical fiscal shift, public debt will cross the critical threshold of 90%, directly threatening national sovereignty and the country’s stability.”
“Stabilization as early as 2026 is technically possible. It requires a two-pronged strategy: drastic rationalization of public spending combined with an assertive optimization of tax collection,” the economist further stresses.
Adjustment will not be merely technical
However, she notes that “the adjustment will not be merely technical; it will be political. Its success depends on full institutional transparency and a strong social consensus. Without broad buy-in, no fiscal consolidation reform can be sustained over time.”
The first pillar of the recommended strategy, gradual fiscal consolidation, entails progressively reducing the fiscal deficit by controlling public expenditure, improving spending efficiency and easing budget rigidities. Key measures could include capping the public-sector wage bill, reforming energy subsidies, and shifting subsidies toward direct cash transfers.
“The main advantage of this option is that it strengthens fiscal discipline without abruptly cutting essential social services. It is more politically acceptable if implemented gradually and transparently. However, its impact on debt levels may take time to materialize and could face resistance from public-sector unions or groups affected by subsidy reforms.”
Need for progressive tax reform
The second pillar, revenue mobilization, should be based on “a progressive tax reform aimed at increasing public revenues by improving tax collection, broadening the tax base, and making the tax system more equitable. Key reforms may include combating tax evasion, integrating the informal sector, and increasing progressivity through personal income tax or wealth taxes.”
According to the brief, “the main advantage of this option is that it generates additional fiscal space without cutting spending, helping to protect vulnerable populations. It can also enhance social equity and strengthen the legitimacy of fiscal policy. However, poorly targeted tax increases may hinder private investment or consumption.”
Three prerequisites for implementing a mixed strategy
Implementing this mixed strategy requires three prerequisites: “a medium-term fiscal framework with credible primary balance targets; strengthened transparency and accountability through the Court of Auditors and Parliament; and institutionalized social dialogue involving trade unions, civil society, and international partners to ensure the legitimacy of reforms.”
“The Tunisian government (Ministry of Finance and Ministry of Economy) will be tasked with leading implementation and monitoring. Parliament will provide legislative support and budget oversight, while the Central Bank of Tunisia will coordinate macroeconomic policy and manage debt instruments.
Other stakeholders will also play a key role in ensuring the success of fiscal reforms, particularly civil society and trade unions, which will support social dialogue and accountability, as well as potential international partners.”
In summary, “Tunisia does not need a brutal fiscal shock but rather a sustained and credible commitment to fiscal responsibility. The sustainability of Tunisia’s debt depends less on abrupt adjustment than on a credible trajectory supported by strong institutions and lasting political commitment.”
