The latest figures published by the Central Bank of Tunisia show a worrying development of the Tunisian public debt whose amount reaches 63.18 billion dinars. In one year, the total government liabilities to its various donors increased by about 10 billion dinars, reaching 66.9% of the GDP for July 2017 (against 60.9% a year earlier).
Debt service rose from 2.83 billion dinars in July 2016 to 3.63 billion dinars in June 2017 and 4.82 billion dinars in July (the state budget is 32 billion dinars).
With 43.88 billion, the debt represents a major part of the Tunisian debt, thus particularly vulnerable to the variations of exchange. However, the price of the national currency has experienced a sudden deterioration since mid-April: 1 euro traded for 2.45 dinars on 1 January, and more than 2.90 at the end of September.
The trade deficit widens
This devaluation has contradictory effects on the trade balance, but overall the increase in export earnings in the first eight months of the year by 18.1% compared to the same period in 2016 did not compensate that of import expenditure, by 19.3%. The deficit stood at the end of August at 10.0 billion dinars, against 8.25 billion the previous year at the same period. Tunisia’s foreign trade benefited from higher crude oil receipts (+ 114%), good results from the textile industry (+ 15.6%) and all manufacturing industries. Exports of phosphate and by-products, on the other hand, declined sharply by 15%. Tunisia’s energy and food dependence continues to weigh on the trade imbalance.
A budget more in deficit than expected
Moreover, Tunisia fails to reduce the imbalance of its public accounts. The deficit of the state budget which already amounts to 3,177 billion dinars at the end of July (about more than 3% of the GDP of Tunisia), leading to overshooting the deficit provided for in the Finance Law 2017 (5.345 billion dinars, or 5.4% of GDP).
The depreciation of the dinar which increases the cost of servicing the debt does not alone explain this poor result. Wage payments rose by 11.4% until the end of July, when under pressure from the IMF to reduce the share of its payroll in GDP, it was expected to limit this increase to 4% for the whole year . The low rate of tax collection (which reaches only one-third of the forecasts for 2017 in the middle of the year), the lack of receipts from the sale of confiscated property and external donations (instead of 200 and 250 respectively million) and the poor performance of public companies, cannot compensate for the unexpected increase in expenditure.
More taxes in 2018
The first indications concerning the Finance Law 2018, under negotiation with the social partners, reveal that the government plans to increase VAT, create a generalized social contribution to bail out the social accounts, and the rate of withholding tax on profits distributed by the companies. Measures to reduce the purchasing power of the middle classes, already affected by inflation of 5.7% at the end of August.