Article

 

Is Tunisia’s external debt sustainable? A cointegration-based analysis  (p.83-104)

by

Abdelaziz Essayem, ISCAE, University of Manouba

Keywords : Foreign debt, Debt sustainability, Budget deficit.

JEL classification : H63, G18

Abstract

The contribution of borrowed capital could have dramatic consequences if the increase in foreign debt is not used to make profitable investments. Thus, monitoring the external debt of low-income countries and emerging economies is required. Monitoring tools based on different approaches in terms of empirical testing are therefore useful for studying the dynamics of debt and assessing its sustainability. We propose to study the dynamics of the Tunisian foreign debt during the period 1983-2010. Two theoretical approaches for assessing debt sustainability are used as they best suit the empirical quality of our study. The results obtained reveal a contrasted situation. We propose to apply two assessment approaches to the sustainability of Tunisia’s external debt. Surprisingly, while the so-called accounting approach suggests that debt is not sustainable, the two versions of the actuarial approach confirm the opposite. We assume that Tunisia’s foreign debt remains sustainable.