Tunisia Credit Crowding Out Private Borrowing

The private sector’s debt has not really shrunk because borrowers became dramatically more cautious. It has lost ground in real terms because inflation surged more than 23% between 2022 and 2025, while nominal private borrowing rose only 7.3%. Measured against economic output, debt owed by firms and households fell to 78.4% of GDP from 90.5% three years earlier. That looks like deleveraging, but it is really a rationing of credit.

The state, meanwhile, remains stuck at roughly 76% of GDP and is still borrowing to cover wages, subsidies and other current expenses. That is the key economic problem: debt is not being directed toward productive capacity, but toward keeping the government’s books afloat. When the sovereign absorbs the financial system’s lending capacity, the multiplier works in reverse. Instead of helping growth, debt starts to suppress it.

For investors, the message is straightforward. Tunisia is not just dealing with a larger public debt load; it is facing a lower-quality growth model. That raises pressure on banks, which face a weaker pipeline of private lending, and on any domestic businesses that depend on credit to expand. It also means the country’s financing balance is becoming more vulnerable to any slowdown in tax revenue, any rise in borrowing costs, or any loss of confidence in the state’s ability to keep rolling its obligations.

The long-term risk is that this becomes self-reinforcing. If the state keeps taking the cover, the private economy has less room to breathe, which limits growth, which then makes the state even more dependent on borrowing. For investors, that is the kind of story that argues for caution, selectivity and patience. Tunisia’s debt problem is no longer only about how much the state owes. It is about what the state’s borrowing is doing to the rest of the economy — and that is a warning worth watching closely.