Tunis: Moody's Ratings (Moody's) has on Saturday changed the outlook on the Government of Tunisia to stable from negative and affirmed the Caa2 long-term foreign-currency and local-currency issuer ratings.
Moody's Ratings ascribes its decision to a noticeable reduction in the current account deficit compared with its historical levels and the agency's previous forecasts, which has sustained the level of foreign exchange reserves and helped repay two successive international issues in October 2023 and February 2024, according to a Central Bank of Tunisia (BCT) press release.
Moody's has also changed the outlook on the Central Bank of Tunisia to stable from negative, and affirmed the senior unsecured ratings of Caa2 and the senior unsecured shelf rating of (P)Caa2.
The Central Bank of Tunisia is legally responsible for the payments on all of the government's bonds. These debt instruments are issued on behalf of the government. The change in outlook to stable reflects Moody's view that the pressures that Tunisia's government faces will not materially increase or decrease beyond what is consistent with a Caa2 rating level, which incorporates a non-negligible probability of default.
A material reduction of the current account deficit has supported the resilience of the Central Bank of Tunisia's (CBT) foreign-exchange reserve buffer, which remains an important if finite backstop for forthcoming external debt amortizations, as demonstrated by the repayment out of reserves of a pound 850 million eurobond in February 2024.
The affirmation of the Caa2 ratings reflects an elevated degree of uncertainty over financing sources amid persistently large financing needs, including a still-high fiscal deficit and challenging debt maturity profile.
Tunisia's country risk ceilings remain unchanged at B2 for the local-currency ceiling and Caa1 for the foreign-currency ceiling. The three-notch gap between the local currency ceiling and the sovereign rating reflects relatively predictable, albeit weakened, institutions; balanced against a broad public sector footprint, external imbalances and a challenging political and social environment which hampers the business environment.
Foreign exchange reserves amount to $7.4 billion as of February 2024 - broadly unchanged from their January 2023 level and equivalent to around 3.5 months of import cover - even after the repayment in quick succession of two eurobond maturities of pound 500 million in October 2023 and pound 850 million on 17 February.
Moody's expects the current account deficit to widen to around 4.5% of GDP this year as imports partially recover, this will remain below the average of close to 8% of GDP recorded between 2011 and 2023 and contain overall external financing needs.
Source: Agence Tunis Afrique Presse