In December 2024, two announcements from or about Tunisia seemed to sum up its financial and security challenges for the year ahead.
The first was the hasty last-minute addition to the 2025 budget, inserting a clause that allows the treasury to obtain a $2.2bn credit line from the central bank. The second was confirmation from the Pentagon that a Tunisian government request to purchase US-made Javelin anti-tank missiles for $107mn had been approved.
Tunisia’s problems are mounting as it begins a new year due to its increasing difficulties mobilising external resources and its unprecedented reliance on domestic borrowing, which threatens the country’s banking system, as well as price and currency stability.
President Kais Saied is becoming a crisis manager, having dealt with the COVID-19 pandemic (which he used to remove the Ennahda-led Islamist government in 2021) and Russia’s invasion of Ukraine in 2022, which put a strain on public finances. He weathered the fallout from these crises thanks to popular support, which he reinforced with promises of change, development, and reconstruction once the rebuilding of constitutional institutions was complete. But these promises are far removed from reality.
Debt stacking up
The composition of public debt changed markedly in 2024, with more reliance on domestic borrowing and less on foreign borrowing. According to the general budget law, domestic financing needs are estimated at $6.8bn in 2025, up from $3.6bn in 2024. External borrowing planned for 2025 has been halved to $1.9bn. It was $3.7bn in 2024.
Debate rages over the causes and implications of these radical shifts in borrowing policy in the face of a prolonged economic contraction and geopolitical developments that have revived Tunisia’s security concerns.
As if to demonstrate the changing priorities, the opening of this year's presidential meetings was a session with the Minister of Defence (on 2 January), during which the recently re-elected Saied reaffirmed his commitment to beefing up the military, on the back of the Pentagon's Javelin missiles announcement.
In the short term, there will be immense pressure on public finances, not only in terms of debt servicing but also in the payment of public sector employees' salaries.
Abdeljalil El-Hani, who heads Tunisia's parliamentary finance committee, told Al Majalla that the value of loans due in the first three months of 2025 is $2.8bn, more than half of which is foreign debt. This accounts for half of the principal public debt for the whole of 2025, estimated at $5.7bn.
"There is great pressure on the general budget," El-Hani said. Around $570mn of this comes from continued state subsidies on fuel and other commodities. Another $600mn comes from investment spending. The markets have noticed. While some mutter about a pending default, doubts are being raised about the government's ability to meet its obligations. That still remains unlikely, said El-Hani.
Loans and growth
At the end of January, Tunisia will repay a $1bn bond loan (a loan from the national subscription in treasury bonds) from 2015 in one lump sum. The repayment of that loan will be covered by another $500mn loan from the African Export-Import Bank and from the foreign exchange reserves, which cover 123 days of supply as of 6 January.
El-Hani said the first few months of 2025 are crucial in terms of the value of state revenues, especially given the expected exceptional revenues resulting from the activation of customs exemption decisions, plus corporate tax revenues in March 2025.
