Fitch Ratings raised Tunisia's long-term foreign currency issuer default rating from CCC to CCC+ and also removed the country from the UCO (Under Criteria Observation) category. The change in rating demonstrates the positive perception of the agreement concluded between Tunisia and the staff of the IMF, which must still be validated by the Board of Directors of the Fund in mid-December, for an Extended Credit Facility (MEDC) of a duration of 48 months and an amount of 1.9 billion USD.
Indeed, this agreement should partly contribute to the country’s fiscal consolidation and mobilize new sources of financing. The rating agency predicts that Tunisia’s financing needs will reach 16.4% of GDP and 16.8% of GDP in 2022 and 2023.
The latter will be driven by the increase in additional expenditure aimed at absorbing the shock of the war in Ukraine and the maturities of the external debt of USD 1.4 billion and USD 2 billion. While this agreement provides some visibility on Tunisia’s financing prospects, any deviation from the objectives of the program with the IMF would quickly result in a resurgence of financial pressures:
– according to the rating agency, the public deficit will still reach 7.3% of GDP this year and 5.6% next year;
– the current account deficit will widen this year to 9.3% against 6% in 2021,
– the amortization of the external debt will continue to increase to 5.4% of GDP in 2024,
– growth will remain sluggish (2.4% this year and 1.6% in 2023) in a context that is still very inflationary (9.2% in October, 10.2% expected in 2023).
The average rate of the Tunisian money market increases to 7.26%
According to the Central Bank of Tunisia, the average money market rate stood at 7.26% during the month of November 2022 while it was 7.03% in September and 7.23% in October 2022. The average money market rate reached its highest level since March 2020 (7.35%).
This increase is the consequence of the raising of the key rate by 25 basis points to 7.25% by the Board of Directors of the BCT on October 5, aimed at countering the upward trends in the trajectory of inflation.
Source : Embassy of France in Tunisia
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