Tunisia’s financing needs will remain in the range of 15-20% of GDP over the next three years, reflecting a challenging debt service profile and persistently high budget deficits, said Rating agency Moody’s.
Moody’s expects the budget deficit to widen over the remainder of the year, reaching 8.6 percent of GDP for all of 2022, as the significant impact of high global energy and food prices on the subsidy bill materializes.
Meanwhile, Moody’s expects the current account deficit to reach nearly 10% of GDP this year, after narrowing to 5.9% of GDP in 2021.
It recalled that data released by the national statistics office show that the external deficit in goods widened by 61% year-on-year in the first eight months of this year, reaching 12% of GDP.
While Tunisia’s foreign exchange reserves, which stood at $7.7 billion in August, have remained relatively resilient, with net foreign exchange reserves covering 111 days of imports, Moody’s believes that a deterioration in the balance of payments could quickly put pressure on foreign exchange reserves in the absence of an early agreement on a new IMF program.
While the wage agreement with the UGTT supports progress toward an IMF agreement, the IMF will likely seek further commitments in other areas of reform to be covered under a program, including the restructuring of loss-making state-owned enterprises and the phasing out of consumer subsidies in favor of more targeted financial transfers,” the rating agency said.
It added that the degree of consensus among stakeholders and social interest groups on these reforms remains uncertain, while a history of delays in past reforms clouds expectations of success in a less favorable political and economic environment.