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Debt statistics 2015

Overall international debt burden (% of GDP)125
Government payments on foreign debt (% of revenue)13
Government foreign debt (% of GDP)29
Private foreign debt (% of GDP)16
IMF and World Bank debt cancellation ($ billions)0
Country case studiesYes

Country case study

In the second half of the 19th century, European banks lent large amounts of money to Tunisia to buy military and infrastructure exports from European countries. These loans came with high interest, and payments increased rapidly. In 1869, Tunisia defaulted on its debt, and European creditors, led by France, took over running the Tunisian economy. By 1881, France had had claimed Tunisia as a colony. The French government ended attempts to develop Tunisian industries, limiting development to agriculture and minerals for export, and ensuring that Tunisia continued to buy manufactured goods from France and Europe. [1]

After a struggle lasting many decades, independence was achieved in 1956. Hamid Bourguiba became un-elected President and ruled until 1987. During the 1980s, the country’s debt began to increase as high oil prices meant banks were awash with money, and looking to lend it to emerging markets. At the start of the 1980s, debt payments increased with the rise in US interest rates, and the global economy contracted. As debt payments shot-up, the Tunisian economy stalled. There were increasing protests against the economic situation, with bread riots in 1984, which were violently suppressed by then head of the security forces General Ben Ali.

By 1986, the government could no longer afford to pay its foreign-owed debts. The IMF lent bailout loans to pay off the creditors, whilst insisting that the Tunisian government bring in a structural adjustment programme. In the midst of the economic crisis Bourguiba was judged to be incapacitated and Ben Ali seized power in what was known as the “medical coup d’état”.

Throughout Ben Ali’s regime repression increased to keep his hold on power. After several years of austerity and stagnation, in the mid-1990s the economy began to improve. In 1995, Tunisia became the first country in North Africa to sign a free trade agreement with the EU, which required Tunisia to open-up to more trade from the EU for the decade up-to 2008. In return, Tunisia received significant financial support.

Tunisia became seen as one of the success stories of Africa, with the country growing and on-track to meet many of the millennium development goals. However, despite the economic growth, unemployment remained high, with youth unemployment stuck at 30 per cent, despite increasing levels of education. Inequality increased. Whilst the debt fell, it did so slowly, and by the start of the global financial crisis, the government still spent 10 per cent of revenue on foreign debt payments.

The African Development Bank summarises that: “despite the country’s comparative economic success, key social and development challenges had not been addressed. The combination of youth graduate unemployment, conspicuous and predatory corruption as well as political and economic disenfranchisement had created an untenable condition of discontent among Tunisians”. [2]

In December 2010, large-scale protests against unemployment, corruption and the Ben Ali regime erupted. On 14 January 2011, Ben Ali fled to Saudi Arabia, leaving behind a $15 billion government foreign-owed debt.

One of the demands of the revolution was for an audit into the debts inherited by Ben Ali, and repudiation of those debt payments. In July 2012, a proposed bill for a debt audit was submitted to the National Constituent Assembly, and in August 2012 President Marzouki said the government planned to hold an audit to find out if any of the loans to the Ben Ali regime were stolen in corrupt activities. In October 2012, it was announced that Tunisia was seeking advice from Ecuador on how to audit debts.

However, for the moment debts have remained being paid. With unrest during and following the revolution, the economy has stagnated, for example due to declining tourism revenues. The government has been using-up foreign currency reserves to pay foreign debts. In April 2013, the IMF agreed a bailout loan of $1.75 billion over two years to help Tunisia to keep making debt payments, with austerity and liberalisation conditions attached [conditions not been released yet]. Just as in the 19th Century, debt threatens to take away Tunisians right to make decisions over their economic future.

[1] Bechri, M.Z and Naccache, S. (2003). The political economy of development policy in Tunisia. The University of Tunisia. May 2003.

[2] AfDB. (2011). The revolution in Tunisia: Economic challenges and prospects. AfDB Economic Brief. 11/03/11.

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