Rating changes from CCC+ to CCC-
The rating agency Fitch Ratings lowered Tunisia’s rating from CCC+ to CCC-. In a statement made public, the agency justified the downgrading of Tunisia’s rating by several factors, namely the country’s inability to mobilize sufficient funds to meet its financing needs, the government’s high financing needs , the blocking of the agreement with the IMF, as well as the threatened foreign exchange reserves and the significant deficit of the government’s external financing.
Fitch Ratings also points to the failure to implement the necessary prior measures to unlock the bilateral financing associated with Tunisia’s financing plan, as agreed with the IMF. According to the agency, an agreement between Tunisia and the IMF is expected to be concluded by the end of the year, but this deadline is much later than previous forecasts and the risks remain high.
“We expect government financing needs to be high, at around 16% of GDP in 2023 (around USD 7.7 billion) and 14% of GDP in 2024 (USD 7.4 billion), well above the 2015-2019 average of 9% (…) This situation results from high budget deficits and significant debt maturities, both at the national level (…) and at the international level, including the reimbursements of certain bonds (500 million euros euros in 2023 and 850 million euros in 2024). The government’s financing plan is based on foreign financing of more than five billion dollars (10% of GDP). We believe that most of the plan depends on an IMF program and is unlikely to be fully mobilized this year, even if an IMF agreement is reached in the second half of the year.
Tunisia is in the grip of the worst economic crisis since its independence in 1956. This crisis has been aggravated by the repercussions of the Covid-19 pandemic and the effects of the war in Ukraine, including the high cost of energy imports and of some basic materials.
The Governor of the Tunisian Central Bank, Marouane Abassi, said last January that the Bank forecasts an increase in inflation in 2023 to settle at 11% while this rate was 8.3% in 2022. .
