Debt sustainability remains among the top concerns in Tunisia. The government is striving to reduce its foreign debt share by focusing on domestic financing via its commercial banks and the central bank. Nationalism and reduced foreign dependence represent President Saïed’s main political strategy, following Algeria’s state-led economic model, however without the cushion of oil revenues that its neighbor enjoys.  

Reliance on the Central Bank of Tunisia for foreign‑currency borrowing continues, and FX reserves will again be used to settle the last upcoming Eurobond obligation valued at EUR750mn and due in July 2026. Thereafter, debt‑repayment pressures will moderately ease. Hence, 2026 financing requirements will be met largely through domestic borrowing, given Tunisia’s limited access to external funding. However, the government has indicated its intention to tap international markets for almost EUR2bn during 2026, after having refused an IMF offer for a program due to the concessional aspect of the Fund’s loans and the refusal to remove subsidies.  

 Tunisia’s fiscal stance remains under pressure even if some improvements are materializing. The fiscal deficit is expected to stand at 5.3% of GDP in 2025 supported by stronger revenues. Yet, the Tunisian budget remains highly vulnerable to external commodity shocks, subsidies represent almost 20% of the government’s budget mostly dedicated to oil and gas imports. 2026 presents risks of worsening as the draft 2026 budget signals renewed spending pressures (+6% from 2025), including higher wages, pensions, and social contributions, alongside a new wealth tax. The administration has announced efforts to fight the 40% youth unemployment, which remains a structural problem. However, its proposed solution depends on increasing public sector enrollment, rather than supporting private sector activity. The increase reliance on domestic financing to sustain the government’s operations not only brings inflationary risks, but also increases the vulnerability of Tunisia’s commercial banks due to its greater exposure to the sovereign, and indebted SOEs. The entire banking sector faces mounting pressure from the sovereign‑bank feedback loop and elevated public debt levels. The sector’s non-performing loans reached 14.7% in Q1 2025, the highest in four years. Banks are increasingly financing the government, crowding out private-sector lending and limiting credit availability for firms and households. 

Tunisia’s economy remains heavily regulated and protected, restricting economic opportunities. Trade barriers persist with most countries, especially in the agriculture and automotive sector with strict import licenses and quotas. Foreign direct investment (FDI) amounted USD900mn in 2025 (1.5% of GDP) but continues to face restrictions, particularly in services, and remains low by historical standards, constrained by political and economic unpredictability. 

The economy is sustained by costly public subsidies and public-sector employment, with major state-owned sectors shielded from competition. According to the latest available data, subsidies accounted for 7.1% of GDP in 2024, while social promotion and security programs represented 1.8%. Labor unions remain influential, shaping economic outcomes, with frequent strikes disrupting especially the phosphate and energy sectors. The informal sector remains large in Tunisia, with informal employment accounting for 44.8% of total jobs in 2019.

Corruption is a prevalent issue, though less pervasive than in countries like Algeria, Morocco or Türkiye according to the World Bank indicators. The president has targeted businesses with anti-corruption charges, but these actions have raised concerns about selective enforcement and their impact on investor confidence. Despite these challenges, Tunisia retains some advantages for businesses. Its educated population and geographic proximity to European markets provide potential for market opportunities. The country has developed a diversified economy, combining manufacturing and tourism with hydrocarbons and phosphates. This supports one of the highest standards of living in Africa, with GDP per head estimated at USD4,700 in 2025 (around USD14,600 at purchasing power parity).

Since 2019, Tunisia has moved toward authoritarian rule under President Saïed, whose 2024 re-election with a large majority but low turnout signals weakened democracy. President Saïed  now exercises near‑absolute authority, sidelining political parties and suppressing opposition through arrests and trials widely condemned as politically motivated. The lower house of parliament, inaugurated in 2023, has been stripped of fundamental powers and largely functions as a rubber‑stamp institution.

Public discontent remains elevated, fueled by authoritarian governance, persistent unemployment, rising living costs and deteriorating public services. Local grievances, such as industrial pollution in Gabès, have further underscored dissatisfaction with governance and highlighted the neglect of regional areas. The Tunisian General Labor Union (UGTT) has become a potential rallying point for nationwide protests, openly criticizing President Saïed’s concentration of power and organizing strikes and demonstrations. Looking ahead to 2026, social tensions are expected to intensify as Tunisia becomes increasingly vulnerable to Gen‑Z‑led demonstrations, similar to those that rocked in Morocco in September 2025, driven by frustration with political regression and limited economic opportunities.

Saied has put at the core of his Presidency his populistic message on independence from foreign powers, hence the refusal to accept funds from the IMF or the EU with strings attached. Several of the economic policies enacted since he took office have pushed the economy to reduce imports, with import-substitution-like policies. The results have been modest, with little impact on non‑agricultural and higher value‑added products. This message closely aligns with the stance of the Algerian regime, with whom Saied has strengthened ties.

Tunisia’s geopolitical orientation will remain closely tied to Algeria, reflecting its reliance on imported Algerian gas and longstanding security agreements. New ties with Libya could mark the next stage of Tunisia’s regional diplomacy, while concerns over migration flows will ensure that Europe continues to provide modest support and investment. Overall, Tunisia’s trajectory is increasingly shaped by regional dynamics rather than Western influence. The country maintains cordial relations with Iran and has adopted a vocal anti-Israeli stance on the war in Gaza.