Long-term, in foreign currency and local currency, with a negative outlook
The American rating agency Moody’s announced on Friday evening the downgrading of Tunisia’s long-term sovereign rating, in foreign currency and in local currency, from Caa1 to Caa2 with a negative outlook, reported the Tunis Afrique Presse agency (TAP). /official).
Moody’s also downgraded the Central Bank of Tunisia (BCT), which is legally responsible for payments on all government bonds, from Caa1 to Caa2 with a negative outlook.
According to Moody, this deterioration is explained by the uncertainty as to the government’s ability to put in place measures that can meet the high financing needs.
“If significant funding is not secured, Tunisia risks defaulting on its debt,” the agency warned.
With regard to the negative outlook, Moody’s believes that they are linked to delays in the implementation of reforms and the financing that depends on them and which risks eroding foreign exchange reserves because of the withdrawals for the payment of the service of the debt, thereby exacerbating balance of payments risks.
“Further prolonged delays in putting in place a new IMF program would erode foreign exchange reserves through drawdowns for debt service payments, thereby exacerbating balance of payments risks and the likelihood of a debt restructuring that would result in losses for private sector creditors,” Moody’s said.
The agency had previously warned that the risks weighing on Tunisia’s credit profile would remain on the downside, even in the context of a possible agreement with the IMF, the same source reads.
“The financing outlook remains dependent on the rapid and sustained implementation of reforms which will invariably prove difficult in the face of weak governance and acute exposure to social risks,” according to the rating agency.
He added that implementing the government’s reform program, which offers a path to correct the country’s significant fiscal and external imbalances, “risks being tested by political, social, and institutional obstacles”.
