Tunisia’s 1H23 Budget Surplus Overstates Fiscal Consolidation

Tunisia’s fiscal deficit is expected to narrow to 5.8% of GDP in 2023, with the surplus reported in 1H23 unlikely to be sustained, Fitch Ratings said believing some costs relating to subsidies and transfers over the period have not yet been captured in the budget numbers.

Tunisia posted a budget surplus of TND58.8 million (around 0.4% of GDP) in 1H23, influenced by lower-than-expected spending which reached only 38% of the full-year budgeted level. Subsidies and transfer expenditure in 1H23 was just 27% of the annual budget.

We expect energy and food subsidy costs to fall to about 6% of GDP in 2023 from 8% last year, supported by lower international prices and 2022 domestic fuel and electricity price adjustments. Nevertheless, the subsidy system has not been reformed further and there has been no fuel-price adjustment since November 2022, making a more significant decline unlikely. Imports of energy and agricultural products in 1H23 were broadly similar to 1H22, in local currency terms, suggesting imports of subsidised products have not fallen sharply.

The government may not yet have made some compensation payments to state-owned enterprises (SOEs) involved in importing subsidized products, amid the liquidity constraints it faces in the absence of sufficient external funding. Subsidy spending in 1H22 was similarly lower than expected, but subsequently rose as the government fulfilled delayed payments to the relevant SOEs.


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