The rating agency Moody’s lowered today Tuesday February 23, 2021 from “B2” to “B3” the rating of the long-term issuer in currencies and local currency of Tunisia and maintained the negative outlook.
According to the agency, the downgrade of Tunisia’s rating reflects the weakening of governance in the face of increasing social constraints that increasingly hamper the government’s flexibility to implement fiscal adjustment and reforms. the public sector which would stabilize and ultimately reverse a marked increase in the debt burden.
“Fiscal consolidation and public sector reform will require reaching agreement with civil society institutions both on the direction and on the specific mode of implementation of the measures, which is likely to be at best , a long process “, explains the agency.
The rating is supported by a relatively stable external position through the pandemic shock so far, which offers some support for future external debt service payments, despite the risk of refinancing.
The negative outlook takes into account the risks associated with further delays in negotiating and implementing an IMF program. “Such delays would increase uncertainty over the government’s ability to ensure continued access to official external sources of finance and to maintain access to international capital markets on affordable terms in order to meet the high financing needs over the course of the next few years, “said Moody’s.
The agency stresses that Tunisia’s country limits have been lowered by a notch. Indeed, the ceilings per country in Tunisian local currency have been lowered from Ba2 to Ba3. The three-notch deviation from the sovereign rating reflects relatively predictable government institutions and actions, altered by a strong public sector presence, external competitiveness constraints and a difficult political and social environment that hamper the business environment. .
The foreign currency limit has been lowered from B1 to B2. The two-notch deviation from the local currency ceiling reflects persistent external imbalances and dependence on foreign capital inflows, which increase the exposure of firms to potential transfer and convertibility risks.
