Since the Arab upheavals of 2011, Tunisia’s political transition has been exemplary. It is the only country that has moved forward and started dismantling some of the most deleterious aspects of the authoritarian system. However, the same cannot be said about its economy, which has been ailing since 2011 and none of the transition governments has been willing or able to tackle the most pressing concerns of citizens, domestic businesses, labor unions and foreign trade and investment partners. Everything was put on hold until all executive and legislative functions were filled on the basis of a new constitution and a political consensus on the way forward. In the meantime, the economic growth rate has gone from negative to sluggish, new foreign investment and tourists have become rare, the unemployment rate remains high, especially for the educated youth, and government expenditures and deficit increased while a large and growing current account deficit is causing concern. This paper looks into the political economy of transition in Tunisia since 2011 with a focus on a) the economic cost and consequences of the social upheaval; b) the nature, cost and effect of the ad hoc stopgap measures used to slow down the economic decline and its social consequences; c) the impact of political inertia on economic revival; d) the role and power of various actors—including the state—in promoting or inhibiting stringent reforms and social protection measures; and e) the role of external actors (IMF, World Bank, the EU, the United States, and Arab Gulf states). Questions to be tackled include: a) To what extent is Tunisia moving away from the development model of the past decades or merely adjusting it? How is post-Ben Ali Tunisia handling youth unemployment, labor laws and job protection, the regulatory setting for foreign investment, and subsidies? b) To what extent does the current configuration of political and economic forces in Tunisia inhibit the stringent reforms needed for a prompt economic revival? d) How does Tunisia intend to reconcile neoliberal economic reforms with the need for social equity, regional economic balance, and youth employment? Analysis will be based on economic data, surveys, field interviews, and archival research on policy debates and decisions since 2011. The paper will also draw on the literature on transition, the developmental state, and the link between political and economic liberalization.