Tunisia debt repayment reaching ‘crunch point’

• Fully cleared 2023 debt
• $1.8bn due this year
• Refused terms of IMF loan

Just days after Tunisia announced it had cleared its debts from 2023, an expert is warning the country remains at real risk of a sovereign default, with extensive repayments due to creditors over the next two years.

Finance minister Sihem Nemsia revealed earlier this week that the North African country had settled all domestic and external debts for 2023.

But James Swanston, Middle East and Africa economist with London-based Capital Economics, said this was merely delaying what he feared could be an inevitable default.

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“This year and next always looked to be the challenge,” he said, as that is when Tunisia has $1.8 billion (4.6 percent of GDP) and $2.1 billion (5.1 percent of GDP) worth of debt due for repayment respectively.

He said a €850 million ($924 million) Eurobond maturing next month will be the first test of Tunisia’s ability and willingness to pay its creditors.

Although he does not foresee any real problems in meeting this particular payment – foreign exchange reserves rose sharply in the second half of last year to reach $8.8 billion, not far off of their highest levels since 2010 – he said potential trouble remained.

“The short point is that default may be skirted in February and further external financing from allies may put it off a little longer. But we doubt that default will be avoided altogether,” said Swanston.

Tunisia received $500 million in financing from Saudi Arabia in July last year and a further $268 million from Italy in August. 

Bailout talks with the International Monetary Fund have stalled since last October, when a preliminary agreement for a 48-month loan worth close to $2 billion was reached.

Tunisian president Kais Saied’s government refused to accept the terms of the proposed deal, which remains in limbo.

“In the absence of IMF funding, there is a high risk of a disorderly adjustment,” said Swanston. “Debt payments in early 2025 could be a crunch point.”