TUNISIA

RISK RATING
High
Default High Risk Score 6.00
Normal Average 4.40
Weighted Average 3.87
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

An ongoing political dispute over the powers of President Ka√Įs Sa√Įed and Tunisia‚Äôs parliament is distracting from urgently needed responses to Tunisia‚Äôs weak economy, stubbornly high inflation, and the lack of economic opportunity that is driving violent unrest. The political crisis is likely to delay urgent economic reforms and complicate efforts to handle any new surge in coronavirus cases after Tunisia brought a first wave under control. Talks with the IMF for a new loan are only inching forward, while protests over unemployment target the oil and gas industry, an important generator of foreign currency. The risk of unrest is likely to surge in urban areas, although the prospect of violence is mostly confined to remote and marginalised rural areas. The government‚Äôs ability to attract external support and investment will depend on its performance to maintain political stability, security, and consolidate its fiscal position. Donor-backing will be critical for external borrowing plans.

  • The coalition may fall apart under pressure from challenges such as renegotiation of the IMF programme. The upset electoral victory of president Ka√Įs Sa√Įed, who ran as an anti-establishment independent candidate in 2019, marked a serious setback for Tunisia‚Äôs mainstream political parties that have governed the country since its revolution in 2011. Since then, successive governments have sought to claw back political authority from the president. Prime Minister Hichem Mechichi is due to reshuffle his cabinet, which will exacerbate relations with the president and possibly trigger fresh elections.¬†
  • Violent unrest in impoverished regions such as Sidi Bouzid, which has suffered from a lack of development for decades, are likely in coming months. Angry youths are unlikely to remain patient as economic reforms stall. However, IMF-required cuts to subsidies and public spending lie at the heart of the protesters‚Äô grievances that have again triggered violent unrest in Tunisia. Protests and associated violence against government assets are likely in the one-year outlook. The focus on curbing protests will distract security forces from counter-terrorism operations. The main terrorism threat to Tunisia stems from Katibat Uqba Ibn Nafaa. Tunisian returnees from Syria, Iraq, and Libya are likely to improve Uqba Ibn Nafaa‚Äôs organisational and combat capabilities and try to establish militant cells sympathetic with or supported by the Islamic State.
  • The ability to attract external support and investment will depend on Tunisia‚Äôs performance to maintain political stability, security, and consolidate its fiscal position. the pandemic is hammering the tourism sector, which contributes nearly 10 percent of GDP and is a key source of foreign currency. Donor-backing will be critical for such external borrowing plans. The main political battle will concern the future of the IMF programme. In 2016, Tunisia secured a USD 2.9 billion loan programme with the IMF which was tied to major structural economic reforms which have not been fully implemented. In order to reschedule repayments, the IMF will insist on further reforms including cutting the massive public sector wage bill which will be resisted by most political parties, including those within any new coalition.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
3.8
Expropriation, Nationalisation, Confiscation & Deprivation
2.2
Contract Frustration & Breach
4.0
Taxation
4.5
Bribery & Corruption
4.0
Regulatory Burden
5.0
Strikes, Riots & Civil Commotion
4.0
Security
5.5
Sovereign Default
5.0
Economic Volatiliy
6.0

Risk Rating Scale (small)

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