The rating agency Moody’s downgraded, on February 23, 2021, Tunisia’s sovereign rating from B2 to B3, while maintaining the outlook for this rating to “negative”, according to a press release from the Central Bank of Tunisia (BCT) .
“According to Moody’s, this decision is mainly motivated by its fears about Tunisia’s ability to continue the reform process mainly related to fiscal consolidation and public sector restructuring,” officials said. ‘Issuing institute. The rating agency argues that Tunisia’s institutional and political context, currently marked by strong social pressures and parliamentary fragmentation, inhibits the Tunisian government from making adjustment decisions relating to major budget reforms and public enterprises.
Moody’s also explains that his decision is based on the substantial economic and budgetary impact of the Covid pandemic, raising the debt burden to high levels and increasing its sensitivity to shocks.
So, according to Moody’s, although the comfortable level of international reserves has helped manage external pressures well, it does not exclude the high risk of refinancing.
As for the negative outlook, Moody’s believes that they are reflected in the uncertainty as to the ability of the Tunisian government to ensure continued access to official external sources of financing or to international financial markets, at affordable conditions in order to to meet its growing financing needs, taking into account the delays in the implementation of a new program with the IMF.
They also reflect the lack of a national consensus on major reforms, which is likely to impact the effectiveness of fiscal policy and the ability to reverse the upward trajectory of debt.
The negative outlook also indicates that Moody’s will monitor developments in the financing of the budget and the progress of the implementation of structural reforms.
