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Moody’s Downgrades Tunisia’s Rating

Moody’s Downgrades Tunisia’s Rating

Saturday, 16 October, 2021 - 10:15
People walk along a street in Tunis, Tunisia, on September 23, 2021. (Reuters)

Moody’s Investors Service (Moody’s) has downgraded Tunisia’s long-term foreign-currency and local-currency issuer ratings to Caa1 from B3 and maintained the negative outlook.

The decision comes in light of the economic crisis, which has been worsened by the coronavirus pandemic and the continued absence of political stability.

It reflects weakening governance and heightened uncertainty regarding the government’s ability to implement measures that would ensure renewed access to funding to meet high financing requirements over the next few years, Moody’s said in a statement.

The constitutional crisis that erupted on July 25 following President Kais Saied’s suspension of the former government and parliament based on temporary emergency powers is being exacerbated by the absence of a constitutional court with authority to settle disputes between executive and legislative powers.

While the recent formation of a new government led by Prime Minister Najla Bouden Romdhane sets the stage for renewed negotiations with official and bilateral lenders, a consensus on long-standing reforms, including the public sector wage bill, energy subsidy reform and reform of state-owned enterprises, will be challenging to secure among all stakeholders, including civil society institutions, the agency noted.

“Such reforms are critical to rebalance Tunisia’s fiscal accounts and ensure debt sustainability in the future amid a subdued growth outlook.”

Tunisia has been facing economic challenges since 2011, and its economic growth has not exceeded 0.6 percent over the past decade, while inflation has increased to 6 percent.

Tunisia urgently needs targeted economic reforms to stabilize its economy and put public finances on a sustainable path, International Monetary Fund Managing Director Kristalina Georgieva told reporters on Wednesday.

Georgieva said the IMF had been engaged “quite extensively” with Tunisian authorities on a technical level, and looked forward to hearing their priorities for an eventual lending program with the fund.

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