Moody’s announced on February 28 that it had upgraded Tunisia’s credit rating from CAA2 to CAA1 with a stable outlook. Moody’s also upgraded the rating of the Central Bank of Tunisia’s senior unsecured debt from Caa2 to Caa1, and maintained the stable outlook.
According to the agency, the revision of Tunisia’s rating reflects the improvement in the external debt repayment profile of Tunisia’s private sector, as well as the Central Bank of Tunisia’s (BCT) ability to maintain stable foreign exchange reserves over the past two years.
As a result, Tunisia’s external financing needs are now lower and better covered by foreign exchange reserves. In addition, “the gradual and ongoing reduction in budget deficits is helping to mitigate repayment risk, despite the persistence of certain financing constraints”.
Furthermore, the stable outlook reflects “expectations of external financing needs that will remain contained, even if the fiscal room to respond to shocks will remain limited by high debt levels and access to public financing dependent on the BCT”.
According to Moody’s, positive developments could result from an improvement in the availability of external financing, and if fiscal consolidation proves faster than expected. However, the socio-economic environment will continue to present negative risks to reform momentum and fiscal adjustment efforts.
The agency downgraded Tunisia’s rating in January 2023, with a negative outlook. This downgrade was motivated by the lack of financing to meet the government’s substantial funding needs, increasing the risk of default to a point that no longer corresponds to a Caa1 rating.
TunisianMonitorOnline (NejiMed)
