Fitch Ratings Agency maintained Tunisia's long-term sovereign rating at "B-" with a "stable" outlook, noting that the Tunisian economy enjoys relative diversity and strength in indicators of per capita output and human development, in addition to an educated workforce and stability in the external situation despite shocks, in exchange for high government debt, fiscal deficit, and large financing needs.
Fitch said that the rating also reflects the fragility of public finances to external shocks, especially fluctuations in commodity prices, as a result of the high cost of support, as well as the limited financing options available to the government.
The agency expects the Tunisian current account deficit to expand to 3.9 percent of GDP in 2026, compared to lower levels in the previous period, as a result of rising energy prices and the resulting increase in the trade balance deficit.
This comes despite the improvement in olive oil export revenues, which rose 44 percent on an annual basis during the first half of 2026, in addition to the continued strong performance of the services sector.
Fitch expects the current account deficit to decline to less than 2.5 percent of output during 2027 and 2028, assuming a decline in global oil prices. However, it warned that the Tunisian current account would remain highly sensitive to any prolonged rise in oil prices.
Reduced external financing pressures
The agency believes that the decline in government external debt maturities, in conjunction with continued financing flows from bilateral and multilateral partners, will lead to a decline in net external financing flows to about 1.4 percent of output in 2026, compared to a record level of 3.6 percent in 2024.
ومن المتوقع أن تستقر هذه التدفقات عند نحو 1 في المائة من الناتج خلال عامي 2027 و2028.
Fitch indicated that Tunisia has fully repaid the only outstanding euro bond worth 700 million euros, which matured in July 2026, supported by loans provided by the Central Bank.
She added that the government's restoration of a greater than expected ability to borrow from commercial markets, which the agency expects to begin again in 2026, could contribute to significantly reducing net external financing flows.
Reserves remain solid
Fitch expects international reserves to decline to the equivalent of 3.3 months of current external payments during 2026, as a result of the widening of the current account deficit.
However, it expects that the reduction in the deficit starting in 2027 will allow reserves to gradually rise to the equivalent of 3.7 months of external payments in 2028, compared to an average of 4.1 months for countries classified at the “B” level.
In contrast, foreign direct investment flows to Tunisia rose to about 2 percent of output in 2025, driven by investments in renewable energy projects and industrial activities, and these flows demonstrated the ability to withstand political and external shocks.
High fiscal deficit
Fitch expects the fiscal deficit to widen to 6.4 percent of output in 2026, compared to an average of 3.3 percent for countries rated at “B” level.
The agency attributed this mainly to the high cost of fuel subsidies, which it expects to increase by about 0.8 percentage points of output during the year.
Fitch does not expect to implement fundamental financial reforms in the near term, as it believes that the government has ended efforts to reduce current spending, especially the wage bill.
Although the deficit is expected to gradually decline until 2028, it will remain highly affected by oil prices. According to the agency's estimates, the 2028 deficit will be about 1.4 percentage points higher than its current expectations if the oil price remains at $87 per barrel until that year.
Debt is at 85% of output
The agency expects Tunisian government debt to rise slightly to 85 percent of GDP in 2026, and to remain close to this level until 2028, which is clearly higher than the average of 55 percent for countries classified as “B.”
She pointed out that about 40 percent of the total debt is denominated in foreign currencies, which makes public finances more vulnerable to the risks of exchange rate fluctuations.
Significant financing needs
Although fiscal financing needs are expected to decline, they will remain high, as Fitch estimates financing needs, excluding short-term debt refinancing, at about 13.5 percent of output in 2028, compared to an average of 8.9 percent for B-rated countries.
The agency pointed out that the Central Bank of Tunisia provided the government with interest-free loans worth 7 billion Tunisian dinars in both 2024 and 2025, while the 2026 budget includes a planned loan worth 11 billion dinars, equivalent to 6.1 percent of the expected output.
Fitch believes that the central bank’s financing of the government is likely to stop in 2027, in the absence of large external entitlements, which, according to its estimates, will lead to an increase in net domestic borrowing from 1.7 percent of output in 2026 to 6.5 percent in 2027, which may impose major pressures on the local financial sector.
Pressure on the dinar
Fitch indicated that the effective real exchange rate of the Tunisian dinar rose by 24 percent between 2019 and 2025, according to International Monetary Fund data, as a result of the stability of the nominal exchange rate against major currencies and the rise in domestic inflation compared to trading partners.
In an attempt to reduce demand for foreign currencies and preserve reserves, in May 2026 the central bank took measures restricting access to financing for non-essential imports.
The agency estimates that a decline in external financing needs during 2027 and 2028, in conjunction with containing inflation, will reduce the risks of a sharp and unregulated decline in the value of the dinar, but it expects continued pressure on the currency.
Inflation and growth
On the other hand, Fitch believes that inflationary pressures will remain relatively limited, with a large part of the impact of rising global oil prices being absorbed by supporting fuel prices, in addition to the contribution of favorable climate conditions during the spring growing season in reducing the risks of rising food prices in the short term.
The agency expects average inflation to rise to 5.7 percent during 2026, before declining to about 5 percent until 2028, compared to an average of 8.3 percent during the period 2022-2024.
At the same time, Fitch expects real GDP growth to average about 2 percent annually during the period 2026-2028.
Social unrest
The agency said that recent heat waves caused disruptions in electricity and water supplies, coinciding with high unemployment rates, which contributed to the outbreak of protests in a number of major cities.
Although Fitch believes that the political risks are still limited, it considers the financial risks high, in light of the possibility that the government will resort to increasing social allocations and employment in the public sector in response to social pressures.
