| Catégories des Contributeurs | To assess to which extent public debt in Tunisia is sustainable in the medium term, we apply a stochastic debt sustainability analysis, developped by Celasun, Debrun and Ostry in 2006. In contrast with the conventional debt sustainability analysis (DSA), this methodology explicitly takes into account the uncertainty characterizing the emerging markets, i.e the risks stemming from the interaction of the endogenous fiscal and macroeconomic shocks.
Our baseline projections suggested that Tunisian public debt will be unsustainable, in average, over the whole period (2018- 2022). One of the main advantages of this method is indeed to take uncertainty into consideration, by implementing random draws to the debt dynamics stemming from a set of 1000 shocks, either positive and positive, in order to generate 1000 potential debt trajectories.
It was interesting then to test the forecasting power of the stochastic methodology to an exceptional negative shock: the COVID-19 crisis. The 2021 debt level projected for Tunisia corresponds to our third scenario, where the Tunisian government is not reacting to an increase
in debt levels by a solid and effective fiscal consolidation. |
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