-
The country has seen its debt burden rise and economy contract by 8.8 percent in 2020
-
It is in talks with the International Monetary Fund for a financial aid package
In spite of being under a big mountain of debt, and its economy contracting, Tunisia paid a $506 million installment on its foreign debt on Friday, its biggest payment this year, the North African nation’s finance ministry said, dispelling doubts about the possibility of a default.
Tunisia, which has seen its debt burden rise and economy shrink by 8.8% in 2020, with its fiscal deficit at 11.4% last year, has started talks with the International Monetary Fund on a financial aid package.
Tunisia estimates its debt repayments due this year at $5.8 billion, including $500 million payments in both July and August.
According to officials quoted by Reuters Tunisia will continue to pay its foreign debt. But economists warn that Tunisia’s foreign currency reserves will decline significantly with the debt repayments, hurting the value of the local dinar currency.
Tunisia is facing an economic and social crisis that has worsened due to the effects of the COVID-19 crisis, with the virus spreading rapidly in the country.
A sovereign default in Tunisia – though highly unlikely in the next 12 months – could cost the country’s banks up to $7.9 billion, S&P Global Ratings said in May.