Tunisia has never been so indebted as in recent years, more precisely in the aftermath of the 2011 revolution. It has systematically lined up loans from here and elsewhere, less to finance its development projects and boost its growth than to pay its officials and repay debt service.
The peak of this spiral should be reached in 2020, with the repayment of the principal of a 250 million dinars bond loan maturing in April, according to a Central Bank document quoted by Africanmanager ar.
Another bond issue should be settled in June 2020, in the amount of €400 million, according to the same document from the Issuing Institute.
This is only part of the liabilities that Tunisia is required to discharge in 2020 with a total outstanding amount of 94 billion dinars, or 75.1% of GDP, against 86 billion dinars in 2019.
This is, as summarized in a parable by chartered accountant, Walid Ben Salah, the equivalent of 8 thousand dinars per Tunisian citizen as a share to the public debt of his country, against 7.4 thousand dinars a year earlier.
It is important to specify in this respect that the external debts will have to amount to 70 billion DT, that is 75% of the total debts in 2020, against 62 billion dinars, in 2019, being noted that the external debt represents 56.3% of the GDP, against 54.2% of the GDP, in 2019.
Expenditures that will go to debt service will rise to 11.6 billion dinars, against about 10 billion dinars in 2019, up 18.3%.
In detail, Tunisia will repay some 538 million dinars in 2020, under the credit of the International Monetary Fund, €400 million under the loan contracted on the international financial market, $250 million under the Qatari loan, treasury bills in the order of 2.166 billion dinars and €248 million under the credit contracted in foreign currency with Tunisian banks.
It should be noted that Tunisian public debt, although essentially concessional (nearly 50% of the total) and characterized by long maturities, remains vulnerable to a depreciation of the dinar, since nearly 75% is denominated in foreign currency.
Funding from international donors is expected to remain necessary to cover the deficit.
This obviously affects all public finances, which are subject to numerous constraints.
According to the Coface, the measures aimed at containing the budget deficit should have an impact on the contributions of public consumption and investment.
Moreover, greater control of public spending or tax increases could hamper household incomes, constraining the contribution of private consumption, despite a relative easing of inflationary pressures.
An exponential rise of 229%
Tunisia’s public debt has had an exponential rising curve since the revolution. In 2010, the country’s debt level was confined to 40% of GDP.
At the end of June 2018, Tunisia’s public debt stood at 82.2 billion Tunisian dinars, or more than 30.56 billion dollars, compared to 25 billion dinars at the end of 2010. In other words, Tunisia’s public debt has increased by 229% in eight years.
Beyond the amount, it is the pace of debt growth in recent years that is of concern. In addition to the recourse to foreign loans, this increase is also partly explained by the depreciation of the Tunisian dinar against foreign currencies (dollar, euro, Pound sterling, etc.).
According to projections by the Tunisian Observatory of the Economy, debt servicing, i.e. the amount that Tunisia must repay each year to honor its commitments to its creditors, should reach 22% of projected public expenditure for the current year, with a negative effect on the budget deficit.
Thus, debt servicing has become the Tunisian State’s largest item of expenditure.
This encroaches on the ability to allocate the resources needed to finance public investment, which is essential to revive the Tunisian economy.
As a result, the country is today engaged in a vicious circle of debt that creates dependence on external financing.