Tunisia's Political Crackdown: A Threat to Economic Stability and Investor Confidence

The sentencing of prominent Tunisian opposition leaders to lengthy prison terms on dubious conspiracy charges marks a stark escalation in President Kais Saied’s authoritarian consolidation of power. This political repression, now extending to over 80 individuals including journalists, activists, and former ministers, has profound implications for Tunisia’s economic trajectory. With courts weaponized to silence dissent and democratic institutions dismantled, the risks to foreign investment, tourism, and macroeconomic stability are acute.

Political Repression and Economic Governance

The imprisonment of figures like former investment minister Riadh Bettaieb—who faces 8 years for allegedly “smuggling cash from Turkey and Qatar”—and Ennahda party leader Rached Ghannouchi (22 years) signals a deliberate targeting of economic decision-makers. These leaders were instrumental in shaping policies critical to Tunisia’s post-2011 democratic transition, including foreign investment frameworks and public finance management. Their removal creates a governance vacuum, exacerbating existing challenges like inflation (6.7% in late 2024) and public debt, which is projected to hit 80.4% of GDP in 2025.

The World Bank’s 2025 growth forecast of 2.3%, down from the government’s optimistic 3.2% target, reflects skepticism over Saied’s ability to stabilize the economy amid repression. Private investment has already slumped to 4% of GDP in 2020, a decline of 30% since 2010, with little recovery in sight.

Risks to Tourism and Foreign Relations

Tunisia’s tourism sector, which contributed $2.3 billion in 2024, faces dual threats:
1. Political Unrest: Protests and strikes by marginalized groups—exacerbated by arbitrary detentions—risk destabilizing tourist hubs like Sousse and Hammamet.
2. Geopolitical Tensions: The EU, Tunisia’s largest trading partner, has quietly tolerated Saied’s crackdown while continuing migration cooperation. However, the EU’s credibility is strained, and a shift toward sanctions or reduced aid could further isolate Tunisia economically.

The Investor Dilemma: Costs Outweigh Returns

For investors, Tunisia’s risk-reward calculus is worsening:
- Legal Uncertainty: The “conspiracy trials” rely on charges like “undermining external state security” (Article 72), which can be applied retroactively. This erodes contractual and property rights, deterring foreign direct investment (FDI).
- Labor Market Volatility: Unemployment exceeds 15%, with youth unemployment at 30%. Social unrest, including hunger strikes by detained opposition figures, could trigger strikes or labor disputes.
- Currency and Inflation Risks: The dinar has lost 10% of its value against the euro since 2022, and inflation remains stubbornly high due to energy subsidies and fiscal mismanagement.

Conclusion: A Fragile Outlook

Tunisia’s economy is at a crossroads. While sectors like olive oil (a $1.57 billion export earner in 2024) offer pockets of resilience, the political crackdown has introduced systemic risks that overshadow growth opportunities. Key data underscores the fragility:
- Public Debt: 80.4% of GDP in 2025, with 60% of borrowing domestic, signaling reduced flexibility.
- FDI Decline: A 15.7% drop in investment since 2020, reflecting investor wariness of judicial overreach.
- Global Sentiment: The African Court’s rejection of Saied’s judicial decrees and HRW’s condemnation of “abusive prosecutions” highlight Tunisia’s deteriorating international standing.

Investors should proceed with caution. While short-term opportunities may exist in commodities or state-backed projects, the erosion of rule of law and democratic institutions poses existential risks to long-term stability. Until political repression subsides and governance reforms are enacted, Tunisia’s stock market—tracking at depressed levels—will remain a speculative play rather than a sustainable investment.

In summary, Tunisia’s political crisis is not just a humanitarian issue—it is an economic one. Until the regime reverses course, the cost of doing business in Tunisia will continue to rise.