Tunisia, which has ghosted the International Monetary Fund and feuded with Europe over aid for its languishing economy, has turned olive oil exports into a money spinner to help keep default fears at bay.
It’s a windfall that helped the current-account balance narrow dramatically last year to reach a deficit of 2.5 percent of gross domestic product, the smallest in nearly two decades and down from close to 9 percent in 2022, according to IMF estimates. As talks stalled with the IMF over a $1.9-billion rescue package negotiated more than a year and a half ago, Tunisia has been leaning on its central bank for direct financing of its budget and debt repayments, an unorthodox path championed by President Kais Saied that’s been draining currency buffers.
A turnaround since then has seen the spread on Tunisia’s bonds over Treasuries fall to the lowest in more than four years. Credit default swaps, a gauge of country risk, are at less than half their record level in March 2023. Tunisia’s exported volumes of olive oil rose by about 12 percent in annual terms during the six months through April, a period when prices for the product grew by an average of more than 70 percent.
Olive oil exports delivered bumper proceeds for the country despite a decline in domestic output, contributing to an improvement in the current account last year that helped Tunisia accumulate more than $1 billion in foreign currency reserves, according to economists at JPMorgan Chase & Co.