Fiscal Deficits as the Main Driver of Tunisia’s Current Account Imbalance

This article analyzes the determinants of Tunisia’s structural current account deficits. Building on the intertemporal framework, we develop a theoretical model of current account that incorporates key institutional constraints, notably limited access to international capital markets and domestic borrowing restrictions. Empirically, a structural vector autoregression (SVAR) model based on annual data from 1980 to 2023 assesses the dynamic effects of fiscal, terms-of-trade, and GDP growth shocks. The findings show that fiscal deficits generate the most significant and persistent deterioration in the current account, whereas other shocks depend on their perceived permanence. Policy implications emphasize fiscal consolidation, financial inclusion, and investment-led growth to enhance external sustainability.