Summary:

January and February 2023 data indicate that the servicing of Tunisia’s external debts has absorbed nearly 90% of income from tourism and remittances. The overall cost of external debt servicing rose from $512 million in January and February 2022 to approximately $530 million during the same period in 2023.

While the cost of external debt servicing continues to rise, Tunisia’s bonds have moved into greater distress. After brief signs of recovery following indications from International Monetary Fund (IMF) leadership that a loan deal might be nearing completion, the countries debt now stands among the least attractive in the world.

The costs to insure the country’s debt against default also continues to rise astronomically. Sovereign debt analysts have highlighted President Kais Saied’s comments about sub-Saharan migrants as a particularly destabilizing event, one that may be delaying progress on the IMF loan, as well as other financing programs with partners like the World Bank.

Outlook:  

While President Kais Saied has remained non-committal regarding the IMF loan process, even speculating that such a program is not necessary, economists are largely in agreement that an IMF program is the country’s only hope. Without a massive influx of cash and the requisite systemic reforms, Tunisia is likely to move toward financial insolvency and a painful restructuring of its sovereign debt.

The country’s powerful labor unions have proven capable of applying pressure, having succeeded thus far in delaying progress on the reforms that would satisfy the IMF executive board. However, such delays will likely only continue to harm consumers in the form of inflation, shortages, and rising costs. Our team will continue to closely monitor economic stressors in Tunisia, particularly as debt payments are coming due and no IMF deal has been secured.

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