Fitch Ratings Upgrades Tunisia's Credit Rating from 'CCC-' to 'CCC+'
According to an official statement, this decision is the result of Tunisia's improved external position, which enables the country to maintain its international reserves at a sufficient level to meet external payments and debt obligations.
However, high financing needs and limited access to external financing remain major challenges. The banking sector's ability to absorb a large portion of domestic debt remains uncertain, and the budget remains vulnerable to external shocks.
In particular, Tunisia benefits from a reduced external liquidity risk. The forecast for international reserves remains above three months of external payments until 2026, allowing the country to continue honoring its external debts, despite the absence of an IMF program.
Tunisia will need to repay a $1 billion eurobond in January 2025 and another €700 million eurobond in July 2026.
Fiscal financing needs remain high, reaching 18% of GDP in 2024, and are expected to remain above 14% of GDP until 2026. These needs are mainly due to persistent budget deficits and high debt maturities, both internal and external.
Tunisia has received external financing commitments of $2.8 billion during the first eight months of 2024, part of which was conditional on the approval of an IMF program. The forecasts indicate a net external financing outflow of $1.7 billion (3.2% of estimated 2024 GDP).
Despite a saturated financing capacity, the government could rely on the banking sector to meet long-term financing needs. However, this would increase banks' exposure to the public sector, potentially leading to risks for fiscal and monetary stability.
A decrease in fiscal deficits is expected, with a forecast reduction to 6.4% of GDP in 2024, compared to 7.1% in 2023, thanks to a decrease in personnel expenses and subsidies. However, the agency notes that the budget remains rigid and vulnerable to external shocks, with a significant portion of revenues dedicated to fixed charges such as salaries and interest.
According to the same source, public debt is expected to remain above 80% of GDP, with high sensitivity to monetary and fiscal shocks. The forecasts indicate a decreasing current account deficit (CAD), falling from 2.7% of GDP in 2023 to 2.4% in 2024, supported by growing exports and remittance inflows.
In terms of ESG, Tunisia scores low on political stability and rights, as well as institutional quality, which negatively impacts its credit profile.
Fitch also specified that factors that could lead to a downgrade of the rating include increased tensions on public finances and pressures on external accounts. On the other hand, an improvement in public finances and better access to external financing could lead to a further upgrade of the rating.
