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Moody’s downgrades Tunisia’s rating including its central bank

Tunisia's rating

Moody’s Investors Service has downgraded the Government of Tunisia’s long-term foreign-currency and local-currency issuer rating to Caa1 from B3 and maintained the negative outlook, the agency said in a statement.

The agency said that Tunisia’s rating was downgraded to Caa1, and also announced the downgrade of long-term foreign currency and Tunisian dinar sovereign issuances from B3 to Caa1, while maintaining a negative outlook.

Moody’s reduction also included the Tunisian Central Bank as a guarantor of the repayment of all sovereign bonds issued by the government.

Tunisia’s rating

The downgrade to Caa1 “reflects weakening governance and heightened uncertainty regarding the government’s capacity to implement measures that would ensure renewed access to funding to meet high financing requirements over the next few years,” the statement said.

The agency also explained the rating decision as “There is a risk that, if significant funding is not secured, high liquidity pressure may lead to default.”

Moody’s indicated that the safe level of savings from foreign exchange reserves, relatively reducing the risk of debt default, as well as the ability of the current cash reserves to provide payments to service the external debt that will come due in the short term.

With regard to the negative future outlook, Moody’s justified the decision by “delays in reforms and reform-dependent funding which would erode FX reserves through drawdowns for debt service payments, thereby exacerbating balance of payment risks.”

A few days ago, economic experts warned of a new negative rating expected for Tunisia, with the continued ambiguity of the economic and political phase that the country entered, and the absence of any indications of finding solutions to the public financial crisis.

The decline in the sovereign rating represents a new barrier for the authorities to mobilize financial resources from the international market, while Tunisia needs at least 9 billion dinars to pay the 2020 budget deficit.

Last July, Fitch downgraded Tunisia’s long-term foreign currency issuer rating from B to B- with a negative outlook.

The agency said, in a statement, that the rating downgrade and the negative outlook reflect increased financial liquidity risks, with further delays in agreeing on a new program with the International Monetary Fund.

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