Summary:

On Monday 16 September 2024, leading American credit rating agency, Fitch Ratings, raised Tunisia’s Long-Term Foreign-Currency Issuer Default Rating   to the “CCC+” level, after it was set at “CCC-” level in Fitch’s last assessment on December 8, 2023.  

Fitch stated that the upgraded rating reflects increased confidence in the government’s ability to meet its large fiscal financing needs and 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. 

The rating agency forecasts that reserves will remain above three months of current external payments through 2026. It also expects that a lower wage bill, fewer capital expenditures and reduced subsidies will decrease the fiscal deficit to 6.4% of GDP in 2024, 5.3% in 2025 and 4.7% in 2026, from 7.1% in 2023. 

Additionally, Fitch predicts a low probability of social tension or unrest arising around the upcoming presidential election and expects the incumbent president to be reelected and post-election policy continuity. 

However, it acknowledges there are indicators of a weakening of the rule of law and the right to participation in the political process, as well as moderate institutional capacity and perceived corruption. 

Outlook: 

The rating was widely shared on social media by supporters of the President Saied as a sign of strong economic recovery despite the rating remaining quite low.  

The CCC+ rating still ranks Tunisia among countries with substantial risk, indicating that Tunisia may still need to rely on foreign creditors. 

Tunisia’s recent loan agreements highlight its capacity to secure foreign loans and financial aid, which many observers previously concluded that Tunisia would not be able to do as the once near-certain International Monetary Fund (IMF) loan failed to come to fruition. 

Moreover, bolstered foreign currency reserves was achieved largely through expected tourism revenues, loan deals, food exports, and the reduction of importing subsidized basic goods. Therefore, increased currency reserves should not necessarily be attributed to any meaningful shifts in the country’s economic strategy that would point to longer-term stability.  

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