Moody's changes Tunisia's outlook to 'stable' from 'negative'

Moody's Investor Service changed its outlook to 'stable' from 'negative' on the Tunisian government's issuer rating, citing stability in the balance of payments and the debt burden. The ratings agency also changed the outlook on the Central Bank of Tunisia's ratings to 'stable' from 'negative', and affirmed the 'B2' senior unsecured rating, Moody's said in a report on Friday. The stable sovereign issuer rating outlook "reflects the stabilization in the balance of payments and the debt burden that Moody's expects to be maintained as tighter monetary policy stabilizes the currency and fiscal policy prudence is likely to remain, despite significant constraints to rapid consolidation," the agency said. Tunisi, which recently formed a new government is formed following months of delay, is targeting economic growth of 2.7 per cent in 2020, reducing tax evasion, cutting subsidies especially in energy, and restructuring public companies grappling with expanding deficits. The North African nation, which ousted president Zine El Abidine Ben Ali in 2011, has since struggled with economic problems including high inflation, rising unemployment, weak currency as successive governments struggled to rein in high fiscal deficits and control the public debt. The Central Bank's tighter monetary policy has stabilised the exchange rate and helped rein in the high ratio of debt to gross domestic product that peaked over 77 per cent of GDP in 2018. In 2019, government debt declined to 72.5 per cent of the gross domestic product, mainly as a result of the appreciation of the Tunisian dinar, Moody's estimates. Over the next three years, government spending cuts, especially in the energy subsidy bill, is expected to reduce the fiscal deficit to three per cent of the GDP in 2020, from 3.5 per cent in 2019 and 4.8 per cent in 2018, according to Moody's. However, a faster pace of fiscal consolidation will be slowed down by social considerations as the government focuses on supporting the economy and a rigid structure of government expenditure with public sector wages and interest payments accounting for 50 and nine per cent of total spending respectively. "While the economy's competitiveness has declined significantly over the past decade, its diversification and an educated workforce set the stage for a broad-based recovery if accompanied by business environment reforms that incentivise non-energy foreign direct investments," Moody's said. Moody's said it could upgrade its outlook if there is a "significant and sustained" decrease in the country's external and fiscal imbalances. However, a downgrade is likely if there are delays in the availability of external funding, fiscal overruns or major contingent liabilities that would weaken Tunisia's fiscal strength and the adequacy of its foreign exchange reserves.

Moody's changes Tunisia's outlook to 'stable' from 'negative'

Credit agency affirms Tunisia's long-term foreign debt rating at 'B2'