SOE restructuring drives Tunisia’s fiscal strategy

Tunisia’s 2026 draft budget marks a policy shift toward disciplined fiscal consolidation and structural reform of state-owned enterprises (SOEs) to rebuild market confidence after years of budget inflexibility and growing contingent liabilities. Authorities aim to reduce the deficit to roughly 3% of GDP in 2026 from about 4% in 2025 and stabilize public debt near 80–82% of GDP. The strategy focuses on expenditure control, targeted subsidy reform, and performance-linked restructuring across SOEs that have burdened fiscal accounts and constrained credit ratings.

Tunisia’s SOEs remain the focal point of fiscal vulnerability. Over one hundred enterprises dominate sectors such as energy, transport, and phosphate production, yet many are unprofitable and reliant on recurrent state support. Their combined arrears are estimated in the low-to-mid-teens of GDP, eroding fiscal flexibility and investor confidence. The 2026 framework introduces governance audits, performance contracts, and conditional recapitalizations tied to cost recovery and financial transparency. By embedding accountability into budget law, the government replaces open-ended transfers with measurable restructuring milestones, converting opaque liabilities into managed fiscal exposures.

Financing constraints reinforce the urgency of reform. Domestic banks hold roughly 60% of government securities, limiting space for additional captive financing without crowding out private credit. External borrowing remains constrained by risk premia, with long-dated Eurobond yields near 11–12%, roughly 700–800 basis points above liquid emerging-market benchmarks. The government therefore aims to rely more on concessional loans and domestic debt reprofiling to smooth maturities. The wage bill, at around 15% of GDP, and generalized energy subsidies remain key adjustment levers, as targeted reforms are expected to generate fiscal savings while maintaining social stability.

Macroeconomic fundamentals have begun to stabilize. GDP growth is projected at roughly 2.3% in 2025, supported by tourism, services, and modest industrial recovery. Inflation averaged 6.7% in 2025 and is forecast to moderate toward 5.5% in 2026, assuming continued monetary restraint and easing food supply bottlenecks. Foreign reserves stand near USD 5.5 billion, equal to around 3.6 months of imports—narrow but sufficient under the Central Bank of Tunisia’s managed float. The dinar (TND=X) has depreciated modestly year-to-date against the euro, reflecting a controlled adjustment designed to mitigate imported inflation. Tunisia’s energy bill remains exposed to oil (CL=F) fluctuations, underscoring the fiscal importance of cost-reflective pricing and operational efficiency at energy SOEs.

Investor attention now centers on execution credibility. Reforms at major entities in air transport, electricity and gas, and logistics must deliver operational breakeven within 18–24 months. Independent audits, transparent disclosures, and depoliticized board oversight are essential to reinforce confidence. If measurable progress is achieved and audited statements are released on schedule, sovereign spreads could narrow by 150–200 basis points, re-opening selective market access and lowering domestic rollover risk. An IMF-supported program would serve as a validation mechanism, unlocking concessional flows and multilateral guarantees to backstop the reform cycle.

Regionally, Tunisia’s pivot mirrors North Africa’s broader fiscal modernization trend, where Morocco and Egypt institutionalized fiscal rules and SOE governance frameworks to narrow budget forecast errors and stabilize debt ratios. By embedding audit and tariff policies into statute rather than decree, Tunisia aligns its fiscal regime with regional peers that have reduced volatility and improved transparency. The principal risk lies in implementation slippage: delayed tariff alignment, selective exemptions, or opaque recapitalizations would prolong losses, sustain external spreads, and deepen reliance on domestic liquidity, raising rollover exposure.

The test of reform success is measurable. By the end of 2026, three indicators will confirm progress: a deficit below 3% of GDP on a cash basis with commitment controls; public debt trending toward the high-70s percent of GDP; and at least five large SOEs publishing audited financials under modernized governance codes. Achieving these targets would signal that Tunisia’s fiscal reforms have transitioned from policy intent to institutional discipline, stabilizing TND=X volatility, limiting CL=F-linked budget exposure, and narrowing sovereign spreads toward regional comparators.