I see this as a health story too. In that heat, no water means dehydration and poor hygiene. A power cut can spoil insulin and stop home medical equipment. Public health people call these the social determinants of health, the everyday conditions that decide how healthy people can be, often more than hospitals do.

To understand why the taps ran dry, you have to start with the money. Everyone asks whether Tunisia is heading for a debt default. I don’t think Tunisia will miss a payment on its foreign debt before the end of 2027. It hasn’t defaulted since independence, and the reserve numbers that worry a lot of observers are less alarming than they look. The real pressure is building inside the country. The state is covering a budget blown open by the oil shock with central bank loans that may not be renewed next year, and the power grid, the water network and ordinary people are absorbing the cost.

Part of why the reserves hold is that Tunisia keeps its currency on a short leash. You can’t take dinars out of the country. Residents can’t freely hold foreign currency, and a traveler gets an annual allowance of about 6,000 dinars, roughly $2,000. Paying for anything online abroad means using a special capped card, and services like PayPal basically don’t work. When I explain this to friends here, they’re usually surprised. The logic is simple. The state needs every dollar and euro it has for medicine, fuel and wheat, so it makes it hard for money to leave. That keeps money in. It doesn’t bring new money in. I’ll write about the currency system properly in another piece.

Tunisia’s partners have also changed. Today they’re mainly Algeria, Arab and African lenders, and the European Union. Between them they keep the gas, the credit, and the trade flowing. None of them is paying to repair the systems that broke down this summer, even though people had been warning about them for years.

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How the squeeze works. Top: the oil shock lands on the budget, and the budget leans on the central bank. Bottom: heat and underfunded utilities turn into protest. Algeria supplies gas and power and backs the government. Reserves have cushioned the shock so far.

An oil shock paid for at home

Tunisia’s 2026 budget assumed oil at $63.30 a barrel. Commercial shipping through the Strait of Hormuz has been sharply restricted since late February, and in late September Washington turned down an Iranian proposal to reopen it. Brent was trading around $103–105.

Tunisia imports about two-thirds of its energy. Pump prices haven’t moved since the last increases in 2022–23, and the state sets electricity and gas tariffs, so when world prices rise, the budget absorbs the difference. Fitch now expects a 2026 deficit of 6.4% of GDP, against a median of 3.3% for countries with a similar rating. In September it kept Tunisia’s rating at B- with a stable outlook.

The president has never hidden his contempt for rating agencies. In 2021 he accused them of “biased criteria” and said financial institutions “must also treat us as a sovereign state.” That goes down well politically. What matters here is whether the self-reliance he’s defending is actually working, and so far the record is mixed.

Public debt is about 83% of GDP by the government’s estimate and 85% by Fitch’s, and there’s no IMF program. Tunisia reached a staff-level agreement with the IMF in 2022, but the IMF board never approved it, and the president then rejected its conditions on subsidies and public-sector wages. The government calls that sovereignty. Many Tunisians see it more simply as paying for social peace. People still remember the bread riots of December 1983 to January 1984, when the government doubled the price of bread, security forces killed dozens of protesters, and the increase was reversed within days. No government since has wanted to try that again.

For creditors, at least, the strategy has worked. In July, Tunisia repaid a €700 million Eurobond on time, with help from the central bank. But someone pays for it, and that someone is at home. The 2026 finance law lets the central bank lend the Treasury 11 billion dinars (about $3.7 billion) at zero interest, after 7 billion in each of 2024 and 2025. Commercial banks cover much of the rest. A central bank working paper shows the state’s share of credit in the financial system doubling from 14% in 2010 to 28% in 2023. Banks are sitting on record cash and lending less and less to the productive economy, so Tunisian firms that want to start or grow have a hard time finding credit.

Why the reserves are not the story, and why 2027 might be

Tunisian media have been tracking foreign-exchange reserves slipping below “100 days of imports.” That figure is reserves measured against the import bill, so it drops when imports get more expensive even if the reserves stay put. In mid-September the stock was about 25.3 billion dinars (roughly $8.6 billion), close to where it was a year earlier. Cover had still fallen from about 110 days to 99, mostly because imports cost more. Since then the stock itself has started to slip, and cover was reported at around 96 days by late September. It’s a slow slide so far, and I’m watching it.

Exports, around 70% of which go to the EU, are still the biggest source of foreign currency. Remittances from Tunisians abroad and tourism together brought in 11.7 billion dinars in the first eight months of 2026, about 5% more than last year. Loans from Afreximbank ($500 million) and the Arab Monetary Fund ($312 million) plugged specific holes. As far as anyone can tell from what’s been published, these lenders ask for much less reform than the IMF would. Afreximbank hasn’t published its terms, so I can’t say whether it’s cheaper or more expensive. The trade-off is clearer: money now, without the reforms that would reduce the need to keep borrowing. As a doctor, I’d call that treating the pain and leaving the disease.

The date that really matters is 2027. Fitch thinks direct central bank financing will probably end next year. If it does, the state would need to borrow about 6.5% of GDP a year at home, up from about 1.7% now. That wouldn’t mean default. It would mean banks buying even more government debt, higher interest rates on Treasury paper, and even less credit for private companies, in an economy Fitch and the World Bank expect to grow about 2% a year. The government forecasts more, but hasn’t really explained where that growth is supposed to come from.

I’m genuinely unsure about this part. Fitch’s view is a projection. Parliament has renewed central bank lending three years in a row and rarely pushes back on the executive over the budget, so it could easily do it again. The draft 2027 finance law, due in October, will show which way the government is leaning. I’d say it’s slightly more likely than not that the lending gets renewed.

The faster channel: heat, power, and water

About nine-tenths of Tunisia’s electricity comes from natural gas. By my reading of the official energy data for January–May 2026, roughly three-quarters of that gas came from Algeria, either bought under contract or taken as a royalty on the Transmed pipeline, which carries Algerian gas through Tunisia to Italy. (Algeria has some of the largest gas reserves in the world. Other estimates of Tunisia’s dependence, using different definitions, come out lower.)

In July, an exceptional heatwave pushed demand to a record, and STEG, the national power company, cut power in rotation to keep the whole grid from going down. No major new power plant has come online since 2020. In some regions water was worse. In May, dams in the north were about 78% full; in the center, about 13%. A former state secretary for water estimates that up to half the water in the national water company’s network is lost before it reaches anyone’s tap. Both STEG and SONEDE, the water company, are deep in debt, and much of what they’re owed comes from the state and other public bodies. The state still hasn’t fully reimbursed STEG for the subsidies it delivers on the state’s behalf, so neither company has the money to invest on the scale that’s needed.

The heat was the trigger. What I’m arguing is that years of underfunding left the system with no margin, and the way the state is financing itself now makes that worse.

FTDES recorded 1,101 protest actions in July, the highest July in a decade, and 1,093 in August, more than three times August 2025. Water and electricity were behind more than 60% of July’s protests. Households and shops lost food and income. In Tunis, marches of several hundred people on 25 July and 20 August called for the president to go and for jailed opposition figures to be freed. The president blamed the outages on deliberate sabotage. Many prominent opposition figures are in prison, and press freedom has narrowed. I’ll come back to the politics separately.

Prices weren’t what set this off. Headline inflation was 5.4% in August, and the official prices of subsidized staples barely moved. But that number hides something every Tunisian knows. Subsidized goods like flour, sugar, coffee and cooking oil regularly go missing from shelves and sometimes turn up on the informal market at higher prices, because the state needs foreign currency to import them and rations them. What pushed people into the streets was taps running dry and air conditioners cutting out in heat close to 50°C. And the two stories are linked. The frozen prices that protect household budgets are part of why the utilities have no money to prevent the next failure.

Who holds the other end

Algeria matters most, including for Tunisia’s security. It supplies most of Tunisia’s gas and some of its electricity. It signed a defense cooperation accord with Tunisia in October 2025 without publishing the full text, which raised questions in Tunisia about sovereignty. (A document that circulated online as the text was later reported to be fabricated.) And it backs the government openly. In December 2025, President Tebboune told Algeria’s parliament that Tunisia’s security is part of Algeria’s own. Remarks like that have drawn criticism in Tunisia from people worried about how independently the country can decide for itself.

The oil shock squeezing Tunisia is also helping Algeria, whose budget counts on oil around $70 (its official reference price is $60). The gas contract between Sonatrach, Algeria’s state energy company, and STEG runs to 2027, with an option to extend. Meanwhile Algeria has been sending less gas to Italy through Transmed and more as liquefied gas by ship. That shrinks the royalty Tunisia collects in gas (down by a third in January–May) and means Tunisia has to pay hard currency for more of what it uses.

There’s no public evidence that Algiers has used any of this as leverage, and it kept exporting electricity to Tunisia through its own summer peak. But the dependence is real and growing, and I think it’s Tunisia’s most serious strategic weakness. Algeria’s support makes a chaotic collapse less likely. It also keeps Tunisia’s government close to Algiers and makes any attempt to diversify more costly. Algeria can help Tunisia get through a bad summer. It isn’t going to fix the grid.

The other gap-fillers are Arab and African lenders, handing over $300–500 million at a time. The EU buys about 70% of Tunisia’s exports but hasn’t used that weight to push for political change, despite calls to do so, and migration is the likely reason. It’s one of five pillars of the 2023 EU–Tunisia memorandum, and the part Europe cared about most. Departures from the Tunisian coast fell to about 1,270 in January–July 2026, down from 2,393 a year earlier, and most crossings on the central Mediterranean route now start in Libya. European officials like to credit the 2023 deal. Independent analysts put much of the drop down to things returning to normal after the 2023 surge, Italy’s own bilateral work, and Tunisian enforcement. Either way, Tunisia has already given Europe what it wanted most, so it has less to bargain with now. The card isn’t gone, though. As 2023 showed, departures can jump quickly if enforcement slips.

China has become a major source of Tunisia’s imports, but it hasn’t stepped in as an emergency lender. The United States is mostly absent from all of this. I think that’s a missed opportunity for Washington, and I’ll make that case in another piece.

What would prove this wrong

• Hormuz reopens, and oil drops below about $80 early in 2027. The budget squeeze would ease within a few months. The utilities would still be broken.

• The 2027 finance law keeps central bank lending. Then there’s no sharp break in 2027, just a slower slide.

• Summer 2027 goes by with normal service and protest numbers close to 2025. Then 2026 was a one-off heatwave. I really doubt it.

• The reserve stock falls well below $8 billion, or Tunisia misses a foreign payment. Then I’ve misread where the pressure is.

• Algeria and Tunisia fall out in public, or gas deliveries are interrupted. Then the relationship is shakier than I think.

Four forecasts

Each one tests a different part of the argument. I’ll score them publicly when they resolve.

1. The 2027 finance law, as adopted, authorizes new direct central bank lending to the Treasury. 60%. Resolves 31 December 2026.

2. FTDES records at least 1,000 protest actions in at least one month of June–August 2027. 70%. Resolves 30 September 2027.

3. Sonatrach and STEG announce an extension or a new gas contract, with no interruption in supply, by 31 December 2027. 70%.

4. Italian Interior Ministry data show fewer than 5,000 people arriving in Italy by sea after departing from Tunisia in 2026. 90%. Resolves 31 March 2027.

For the record, I put the chance of a missed payment or distressed exchange on Tunisia’s foreign debt before the end of 2027 at about 10%.

Coming next: Tunisia’s closed currency system; the political situation and press freedom; the Algeria relationship in its regional context; and what the United States is missing in North Africa.

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Sources

This summer’s outages and protests

• Euronews, “Tunisia marks Saied’s emergency measures anniversary amid deadly power crisis,” 25 Jul 2026.

• L’Économiste Maghrébin, “Contestation sociale en Tunisie : l’eau et l’électricité au cœur de 60 % des mouvements en juillet,” 20 Aug 2026.

• Kapitalis, “La tendance à la hausse des protestations se poursuit,” 19 Sep 2026.

• AP, reporting on Tunisia’s summer protests, 20 Aug 2026.

• Al Jazeera, “Antigovernment protesters take to Tunisia’s streets for second month,” 21 Aug 2026.

• The National, “Soaring temperatures lead to deaths and power cuts in Tunisia,” 29 Aug 2026.

• Sharan Grewal, “Tunisia’s summer of discontent,” Brookings, 10 Aug 2026.

• TIMEP, “Power cuts, protests, and (lack of) policy,” 30 Jul 2026.

Health

• WHO, Heatwaves (health topic page).

• CDC, “Managing insulin in an emergency.”

Currency controls

• Tourismag, “Tunisie : doublement du montant de l’allocation touristique, à 6000 dinars par an.”

Oil shock, budget and debt

• Sunday Guardian, “Brent crude oil price today (September 25),” 25 Sep 2026.

• Washington Post, “Trump rejects Iran’s proposal to reopen Strait of Hormuz, restart peace talks,” 26 Sep 2026.

• WebManagerCenter, “Loi de Finances 2026 : comprendre le budget,” 15 Dec 2025.

• ilboursa, “Compensation des carburants : plus de 2 milliards de dinars économisés entre 2024 et 2026,” 21 Nov 2025.

• L’Économiste Maghrébin, “Choc pétrolier : comment la guerre en Iran fait dérailler le budget,” 22 May 2026.

• TAP, report on Fitch’s affirmation of Tunisia at B-, Sep 2026.

• African Manager, “Fitch rating: behind affirmation and cost of money printing,” Sep 2026.

• Ministry of Finance, 2026 state budget summary (public debt estimate).

• IMF, “IMF staff reaches staff-level agreement on an Extended Fund Facility with Tunisia,” 15 Oct 2022.

• North Africa Post, “Tunisia: Kais Saied lambasts rating agencies,” Oct 2021.

• TIME, coverage of the Tunisian bread riots, Jan 1984.

• La Presse de Tunisie, “Budget 2026 : la Banque centrale prêtera 11 milliards de dinars à l’État,” 16 Oct 2025.

• Central Bank of Tunisia Working Paper 1-2024 (Bouaziz & Salem), reported by African Manager.

• La Presse de Tunisie, “Le paradoxe d’une liquidité bancaire record et d’un crédit au secteur productif en recul,” 14 Jun 2026.

• News Tunisia, “Tunisia repays TND 2.35 billion international bond,” 14 Jul 2026.

Reserves and lenders

• L’Économiste Maghrébin, “BCT : les avoirs nets en devises atteignent 25,4 Mrds de dinars ou 110 jours d’importation,” 11 Sep 2025.

• Central Bank of Tunisia daily reserve figures for 14 and 25 Sep 2026, as republished by Tunisian financial media.

• News Tunisia, “Remittances and tourism revenues exceed TND 11.6 billion by end-August,” Sep 2026.

• Ecofin Agency, “Tunisia taps Afreximbank for fresh $500m,” Jun 2026.

• News Tunisia, “The Arab Monetary Fund grants Tunisia a $312 million loan,” 7 Jul 2026.

• European Commission, EU trade relations with Tunisia (export share).

Power, water and prices

• ONEM / Ministry of Industry, Mines and Energy, “Conjoncture énergétique,” May 2026.

• Business News, “Énergie : 66 % de dépendance…” (ONEM data), 15 Sep 2026.

• Maghreb Emergent, “Tunisie : le forfait fiscal sur le transit du gaz algérien en baisse de 33 %” (ONEM data), 2026.

• La Presse de Tunisie, on the Borj El Amri (Mornaguia) power plant, 18 Aug 2026.

• La Presse de Tunisie, on electricity production and peak demand, 20 Jul 2026.

• La Presse de Tunisie, “Barrages : le taux de remplissage a atteint 67 %,” 2 May 2026.

• La Presse de Tunisie, “Tunisie : jusqu’à 50 % des pertes d’eau sur le réseau de la SONEDE,” 26 Feb 2025.

• Ecofin Agency, “Tunisia food inflation climbs in August 2026,” Sep 2026.

Algeria and partners

• Ecofin Agency, “Algeria to maintain power exports to Tunisia despite summer peak demand,” 2026.

• RFI, report on President Tebboune’s address to parliament, 30 Dec 2025.

• Euronews Arabic, on Tebboune’s remarks about Tunisia, 31 Dec 2025.

• TAP, on the Tunisia–Algeria defense cooperation agreement, Oct 2025.

• Anadolu Agency, on Tebboune’s response to the leaked “secret military agreement,” 2025.

• Middle East Eye, “’Vassalage’: deepening Tunisia–Algeria ties spark mounting scrutiny and backlash,” 2026.

• Anadolu Agency, “Algeria and Tunisia agree to extend gas deal to 2027,” Jun 2020.

• Agenzia Nova, “Gas flows from Algeria to Italy slightly down via pipeline, but LNG growth,” 2026.

• Radio Algérie, on the 2026 finance law’s oil price assumptions.

• Rigzone, “Oil at $100 promises boon for Algeria,” 14 Mar 2026.

• European Commission, “European Union and Tunisia: political agreement on a comprehensive partnership package,” 16 Jul 2023.

• Washington Institute, “China’s presence in Tunisia: how far has it come?” Apr 2023.

• Nawaat, “Migration: Tunisians continue to leave despite growing death toll and tighter controls,” 20 Sep 2026.

• UNHCR Italy data, reported by CDE, “Migrant arrivals to Italy fall 30% in first half of 2026.”

• DGAP, “Two years in, the impact of the EU–Tunisia deal on migration is overstated,” Jul 2025.