The Tunisian debt crisis in the context of the COVID-19 pandemic

At the beginning of the pandemic in spring 2020, it was not so much the health crisis, which hit developing countries like Tunisia hard. While Europe and the US struggled with the health impact of the pandemic, it was the global economic impact, which devastated the Tunisian economy.

In April 2020, the IMF forecasted the economy to contract by 4.3 percent over theyear. In the end, real GDP contracted double as much, by an unprecedented 8.2 percent, the largest GDP drop since independence. Tourism and transport collapsed, manufacturing declined in export-oriented sectors. As a result, unemployment jumped to 16.2 percent, with a poverty rate increasing from 14 percent to over 20 percent in 2020. Public debt1 jumped by 15 percentage points from 72 % to 87 % in 2020, due to the economic contraction. Given the dire situation, the Tunisian government officially applied for a new IMF financing program in April 2021, which is not yet finally agreed. By analyzing the latest IMF assessment on Tunisia, this paper discusses the current debt situation of Tunisia, suggested reforms that may end up being part of the IMF program and alternative ways forward.

Press release