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Tunisia Forecasts Debt of 6 Billion Euros in 2022

Illustration of the inextricable situation in which the country is plunged when closing the 2022 finance law.

The Tunisian government presented this Tuesday, December 28, the budget for the year 2022 which provides for the debt of nearly 6 billion euros to revive an economy heavily affected by a political crisis and the Covid-19 pandemic. It should be noted that the Tunisian economic crisis, characterized by growth at half-mast for ten years, 0.6% per year on average, and high inflation of 6% per year, has been aggravated by the pandemic which has put the country at the shutdown and deprived it of crucial tourist revenue. GDP thus plunged by 8.8% in 2020, a fall that should barely be offset by half in 2021: + 4% growth forecast by the World Bank. But, for many experts and economists, Tunisia’s economic problems are above all structural. Since the revolution, debts and their repayments have dragged the country into a vicious cycle.

The use of borrowing continues in the 2022 budget

To get out of the rut, at the time of completing the state budget for 2022- estimated at 57.2 billion dinars (approximately 17.6 billion euros), an increase of 3.2% compared to that of 2021 – the government has presented a panoply of solutions. The budget deficit forecast in 2022 will reach 8.5 billion dinars (2.6 billion euros), which represents 6.2% of GDP, the Minister of Finance said at a press conference in Tunis, Sihem Boughdiri. The budget also provides for the debt of nearly 20 billion dinars (5.7 billion euros) to cover the expenses provided for in the budget and cash flow requirements. With these credits, the level of public debt will reach 82.6% of GDP, against 85.6% in 2021. This debt will be in the form of external credits of 12.6 billion dinars (3.9 billion euros ) and domestic loans of 7.3 billion dinars (2, 3 billion euros), according to the minister. This bill was developed on the basis of a hypothetical growth rate of 2.6%, and an average price of a barrel of oil of $ 75.

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The country suspended from negotiations with the IMF

In reality, the government has little room for maneuver. In 2021, Tunisia’s external debt had reached a peak of 100 billion dinars (around 30 billion euros) or 100% of GDP. To replenish the state coffers and revive the economy, the authorities, therefore, intend to conclude an agreement with the International Monetary Fund (IMF), said Ms. Boughdiri. “Negotiations with the IMF will resume at the start of 2022,” she added. According to the minister, a document prepared by more than 80 Tunisian experts and presenting “a reform program in several sectors” will be negotiated with the IMF. Tunisia, which is struggling to repay its debts, had held discussions with the IMF in 2021 for a new loan in return for socially difficult reforms intended to consolidate its finances.

These reforms notably include the reduction in subsidies for basic necessities, a reduction in the state wage bill, which employs 680,000 people in a country of 12 million inhabitants, and the restructuring of numerous public enterprises. “These reforms are essential to rebalance the budgetary accounts and ensure debt sustainability in the future in a context of moderate growth prospects,” the rating agency Moody’s said last October when downgrading the rating. sovereign of Tunisia. Its rating dropping from B3 to Caa1, meaning that confidence in Tunisian finances, on a scale from AAA to C, is decreasing and that the risk that Tunisia will not repay some of its debts is high.

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