Fitch Ratings has upgraded Tunisia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’, from ‘CCC-‘. Fitch typically does not assign Outlooks to issuers with a rating of ‘CCC+’ or below.
“The upgrade reflects our increased confidence in the government’s ability to meet its large fiscal financing needs,” the agency said, attributing the upgrade to “Tunisia’s stronger external position, which enables it to maintain international reserves at levels sufficient to meet current external payments and debt obligations.
However, this is “balanced by still-elevated financing needs, limited access to external financing, uncertainty over the ability and willingness of the banking sector to take on large volumes of domestic debt and a budget that remains vulnerable to external shocks, Fitch said.
On the other hand, the agency considers the likelihood of social tensions or unrest related to the upcoming presidential elections to be “low”, although some candidates have been prevented from participating in the process and legal disputes are ongoing.
“We expect the incumbent president to be reelected and post-election policy continuity. Governance, as measured by the World Bank Governance Indicators (WBGI), is a strength relative to peers, although recent developments pose a downside risk,” Fitch added.
