Tunisian President Kaïs Saïed is proposing a strategic shift to convert a portion of Tunisia’s national debt into public investments to stimulate economic growth. This proposal, discussed during high-level meetings with economic officials, aims to move away from traditional debt servicing toward a model where financial obligations are repurposed to fund domestic infrastructure and development projects.
The move comes as Tunisia continues to struggle with a severe fiscal crisis and stalled negotiations with the International Monetary Fund (IMF). By transforming debt into investment, the Saïed administration seeks a path to economic sovereignty that reduces reliance on external loans while addressing the country’s deteriorating public services and infrastructure.
Tunisia’s public debt has remained a critical pressure point for the North African nation. According to data from the International Monetary Fund, the country has faced significant challenges in securing a new loan package, primarily due to disagreements between the presidency and the IMF over structural reforms, including the removal of subsidies and the privatization of state-owned enterprises.
The Strategy to Convert Debt into Public Investment
President Kaïs Saïed’s proposal centers on the concept of “debt-for-investment” swaps. Rather than spending limited foreign currency reserves to pay interest and principal on loans, the government would negotiate with creditors to redirect those funds toward specific, productive public works. This approach is designed to create a multiplier effect, where the “payment” manifests as a new bridge, power plant, or agricultural project that generates future revenue.
This strategy reflects Saïed’s broader political stance against “dictated” austerity measures. The president has repeatedly stated that Tunisia will not implement reforms that he believes would harm the poorest citizens or compromise national sovereignty. By focusing on investment, the administration hopes to stimulate the GDP without implementing the drastic spending cuts typically required by international lenders.
Economic analysts note that while debt-for-nature or debt-for-development swaps are established tools in international finance, applying them on a scale large enough to stabilize a national economy is complex. Success depends on the willingness of bilateral and multilateral creditors to accept a reduction in direct cash payments in exchange for verified investment outcomes.
The Deadlock with the International Monetary Fund
The push for debt conversion happens against the backdrop of a prolonged stalemate with the IMF. Tunisia has been seeking a loan of approximately $6.5 billion to avoid default and stabilize its currency. However, the IMF has insisted on a comprehensive program of structural reforms as a condition for the disbursement of funds.
Key points of contention include:
- Subsidy Reform: The IMF advocates for the gradual removal of subsidies on basic goods to reduce the budget deficit.
- State-Owned Enterprises (SOEs): Lenders have pushed for the privatization or restructuring of loss-making state companies.
- Public Sector Wages: There are ongoing disputes regarding the freezing or limitation of public sector salary increases.
According to reports from Reuters, the Tunisian government has expressed reluctance to adopt these measures, fearing they would trigger widespread social unrest in a country already grappling with high inflation and unemployment.
Impact on Tunisia’s Economic Outlook
The feasibility of converting debt into investment will depend on Tunisia’s ability to maintain its creditworthiness while negotiating these unconventional terms. If the government cannot reach an agreement with the IMF or secure alternative funding, it faces the risk of a sovereign default, which would further isolate the country from international capital markets.
For the average Tunisian citizen, the success of this plan would mean a visible increase in public works and a potential stabilization of prices. However, if the conversion plan fails to materialize as a viable alternative to an IMF deal, the government may be forced to implement the very austerity measures it currently opposes to avoid total financial collapse.
The Tunisian Central Bank continues to monitor foreign exchange reserves, which are essential for importing food and medicine. Any shift in debt management strategy will have a direct impact on these reserves and the stability of the Tunisian Dinar.
Next Steps for the Saïed Administration
The administration is expected to present a more detailed framework for the debt conversion proposal in the coming months, outlining which specific sectors—such as energy, water, or transport—will be prioritized for these investments. The government must now engage in diplomatic negotiations with its primary creditors to determine if they are open to this alternative repayment structure.
The next critical checkpoint will be the upcoming review of Tunisia’s fiscal targets and any formal announcement regarding a renewed negotiation cycle with the IMF.
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