Tunis: A meeting between Finance Minister Michket Slama Khaldi and heads of banks has brought back into focus a long-standing challenge facing Tunisia's public finances: the growing reliance on domestic borrowing to cover the state budget, while banks continue to maintain their role in financing the real economy and supporting investment.
According to Agence Tunis Afrique Presse, during the meeting held on Tuesday, the Finance Minister called on banking and financial institutions to continue supporting the budget in the coming period by actively participating in the various Treasury bond issuances scheduled for the second half of the year, while ensuring compliance with financial soundness indicators and prudent management standards.
Banking and financial sector representatives, for their part, expressed their readiness and continued commitment to supporting the state's efforts to preserve financial stability in the interest of Tunisia, according to a statement from the Ministry of Finance.
Economic expert and asset management specialist Larbi Benbouhali said the meeting reflects the government's push to increase subscriptions to Treasury bonds to secure financing needs in the coming period, amid limited funding options and rising public spending requirements.
He explained in an interview with TAP that this approach follows a previous meeting between the Governor of the Central Bank of Tunisia and heads of commercial banks, which called for strengthening financing directed toward the private sector to support investment and economic growth. This, he noted, places banks in a difficult balancing act between meeting the state's financing needs and maintaining their role in funding economic activity.
According to the expert, pressure on public finances stems from several factors, including a persistent budget deficit, a high energy and basic goods subsidy bill, and weak tax revenues due to the expansion of the informal economy, estimated at around 40% of economic activity. This, he said, deprives the state of roughly 12 billion dinars in annual tax revenues.
He added that the Central Bank has injected, in his estimate, around 25 billion dinars into the economy over the past three years (7 billion, then 7 billion, then 11 billion dinars) to finance state needs, noting that international financial institutions have repeatedly called for limiting reliance on monetary financing due to its potential inflationary pressures.
He also pointed out that commercial banks are facing increasing liquidity pressures, having provided more than 33 billion dinars in financing to the government in 2025, while non-performing loans reached around 19 billion dinars, or 16% of total loans, at a time when cash circulating outside the banking system is estimated at around 28 billion dinars.
The expert considers that the continued allocation of a large share of banking liquidity to Treasury bond purchases could limit banks' ability to finance private sector companies. This, he said, is known economically as 'crowding out,' where increased government domestic borrowing reduces credit available for investment and production, potentially affecting growth and employment.
He stressed that addressing this issue requires structural reforms in public finances, including rationalizing spending, reforming subsidies, broadening the tax base, and improving the integration of the informal economy into the formal system. This would reduce reliance on domestic borrowing and allow banks to allocate more resources to private sector financing.
This debate comes as the government seeks to secure resources to implement the state budget, while investors and the banking sector closely watch the direction of fiscal policy in the coming period, amid ongoing domestic economic challenges and global volatility. The main challenge remains balancing the state's financing needs with ensuring a steady flow of funding to the real economy, given its direct impact on investment, growth, and financial stability in Tunisia in the period ahead.