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Tunisia: IACE recommends creating debt securitization Company

The Institute of Arab Business Managers (IACE) recommends that the government set up a debt securitization company, pending the establishment of the Tunisian Debt Agency, in order to finance the accumulated credits of certain public companies, notably the CNSS and the CNRPS, as part of a plan to revive the management of domestic public debt.

IACE recently published a “Post-lockdown Recovery Plan,” showing that “if the planned reforms are not undertaken, the social funds will need an additional 2 billion dinars in 2020 and 2.4 billion dinars in 2021, to pay retirement pensions.”

This package alone “will allow reviving the Tunisian private sector and strengthening its resilience.”

The IACE indicated that the securities issued by the debt securitization company will be bought back by banks and refinanced by the central bank with an outstanding amount of 5 billion dinars per year, with a set rate of 5% including the banking commission and guaranteed by the pledge of 50% of the BCT’s profit over 20 years.

Securitization is a financial technique consisting in transferring to investors assets such as commercial receivables (unsettled invoices issued…), or outstanding loans (consumer loans…).

These securities give investors the right to receive payments when invoices are settled (trade receivables), or when monthly installments are paid on loans.

Security holders will recover their investment in the form of principal and interest payments.

The Institute stressed that the un-sustainability of Tunisia’s domestic debt may raise concerns about the impact of this debt on private sector investment, and consequently on the country’s economic growth.

It called, therefore, for the use of new instruments to avoid domestic borrowing, estimating that “the Tunisian government is becoming heavily indebted on the domestic market and especially with the private sector; the domestic debt has been increasing steadily since 2010, rising from 10 billion dinars in 2010 to 23.4 billion dinars in 2019.

The plan published by the IACE proposes some guidelines for the economic recovery of the country after the lifting of the lockdown.

These guidelines mainly involve recovery in the fields of employment, business climate, management of domestic public debt and taxation.


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