Fitch Ratings upgraded on Monday Tunisia's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'CCC+' from 'CCC-'. The upgrade reflects increased confidence in Tunisia's ability to manage its fiscal financing needs. Stronger external liquidity and a reduced current account deficit have contributed to this upgrade. While Tunisia faces challenges such as high debt levels and limited access to external financing, it has demonstrated resilience in meeting its obligations. The government's ongoing efforts to reduce the fiscal deficit and secure external funding have been key factors in the rating upgrade. "The upgrade reflects our increased confidence in the government's ability to meet its large fiscal financing needs. This stems from Tunisia's stronger external position that enables it to maintain its international reserves at a sufficient level to meet current external payments and debt obligations." Fitch statement read. "This is balanced by still-elevated financing needs, limited access to external financing, uncertainty over the ability and willingness of the banking sector to take on large volumes of domestic debt and a budget that remains vulnerable to external shocks." Fitch notes that Tunisia's economy remains vulnerable to external shocks and that challenges related to domestic financing and political stability persist. However, the recent positive developments in terms of debt management and external liquidity have improved the country's creditworthiness. "We expect fiscal financing needs, excluding short-term amortisations, at 18 per cent of GDP in 2024 and to remain above 14 per cent of GDP over 2025-2026. This is well above the 2015-2019 average of 9 per cent and is among the highest levels of peers rated at 'CCC+' and below. "The high financing needs stem from persistently wide budget deficits and high long-term domestic and external debt maturities, which stood at about 11% of GDP in 2024." Moreover, Fitch said it forecasts public debt to remain above 80 per cent, at 83.4 per cent in 2024, 82.2 per cent in 2025 and 80.8 per cent in 2026. Attribution: Fitch Ratings
