Public debt, growth and stabilization in Tunisia: A new narrative for a structural reform agenda

Tunisia - 1 September 2023

Trade topics: Public Policy, Climate Change, Economic Recovery, Tunisia, Development, Competition Policy

This paper assesses debt sustainability in Tunisia using the Debt Sustainability Analysis (DSA). We construct three hypothetical scenarios (A, B and C) over the period 2023-2027. The first two scenarios are called Business as usual approaches. In Scenario A, we assume that Tunisia will continue the same path as in the past three years, without an IMF agreement. In scenario B, Tunisia reaches an agreement with the IMF. However, the lack of considerable progress on the reform agenda causes the ending of the IMF agreement. The last one (Scenario C) is a proactive reform scenario. We conclude that “business as usual” approach (scenario A and B) cannot guarantee neither economic resilience nor debt sustainability. There is an urgent need for a broader approach to debt sustainability with reforms, similar to Scenario C, that would lead to resilience toward both economic and non-economic shocks.

Author(s): Baghdadi Leila and Labidi Moez