Fitch Ratings revises up Tunisia's rating to CCC+ from CCC-
Date
9/17/2024 7:40:25 AM
(MENAFN) On Monday, Fitch Ratings announced that it has upgraded Tunisia's long-term foreign currency issuer default rating from "CCC-" to "CCC+." This rating improvement reflects Tunisia's enhanced external position and the government's capacity to address its substantial fiscal financing requirements. The upgrade indicates that the country has made strides in managing its external financial obligations and is better positioned to meet its large budgetary needs.
However, Fitch also noted that this positive assessment is tempered by several challenges. The country continues to face constraints in accessing external financing, and there is considerable uncertainty regarding the banking sector's capacity and willingness to absorb significant volumes of domestic debt. Additionally, Tunisia's budget remains susceptible to external shocks, which could impact its fiscal stability.
According to Fitch, Tunisia's government will require approximately 10 percent of its GDP in long-term domestic financing for this year, with similar needs projected at 10 percent-12 percent for the years 2025 and 2026. The rating agency expressed some optimism that the domestic banking sector might be able to help meet these financing needs, as the sector is currently benefiting from increased deposit growth and subdued credit demand, which support its liquidity.
Nonetheless, Fitch cautioned that increasing the banking sector's exposure to the public sector poses risks, given that the public sector already constitutes about 20 percent of the sector's total assets. This situation could lead to a greater need for refinancing by local banks, which may require intervention from the central bank to maintain financial stability.
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