Fitch downgrades Tunisia’s credit rating amid economic crisis

TUNIS, Tunisia

Global credit ratings agency Fitch has downgraded Tunisia from CCC+ to CCC- amid a severe economic crisis in the North African nation.

“The downgrade to ‘CCC-‘ reflects uncertainty around Tunisia’s ability to mobilize sufficient funding to meet its large financing requirement,” the credit agency said in a statement.

“This reflects the failure to implement prior actions for an agreed IMF programme, which would be necessary to release the associated bilateral financing that underpinned Tunisia’s financing plan,” it added.

Fitch said the high risks to Tunisia’s financing plan lies in the fact that it relies on more than $5 billion of external financing (10% of GDP).

“The government financing needs will be high at around 16% of GDP in 2023 (about $7.7 billion) and 14% of GDP in 2024 ($7.4 billion), well above the 2015-2019 average of 9%, and one of the highest of ‘C’/’D’ rated peers,” it added.

Fitch also expects that the current account deficit will narrow to 7% of Tunisia’s GDP in 2023 and 6.5% in 2024 from 8.5% in 2022.

“The improvement will be driven by a significant recovery of tourism receipts, largely off-set by deepening energy and food balance deficits, despite the decrease in international prices,” it added.

Fitch expects Tunisia’s GDP to slow to 1.4% in 2023 from 2.4% in 2022.

Negotiations between Tunisia and the IMF to obtain a $1.9 billion loan over four years have stalled since October 2022.

Tunisia has been in the throes of a deep political crisis that aggravated the country’s economy since 2021.

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