Fitch Ratings has maintained Tunisia's sovereign rating with a stable outlook, according to a recent statement. The agency noted that Tunisia successfully met a €700 million maturity in July, made possible by support from the Central Bank and bilateral and multilateral financing. This has played a crucial role in maintaining financial stability. However, despite meeting its immediate obligations, Tunisia faces significant challenges in restoring sustainable financial equilibrium.
Tunisia's public debt is estimated to be around 85% of GDP, with a budget deficit of 6.4%. The Treasury will require substantial resources to address these challenges. Relying heavily on domestic debt could further expose the banking system to sovereign risk. Fitch's analysis suggests that the country's growth rate is expected to average around 2% from 2026 to 2028, which could limit the government's fiscal space.
The reliance on domestic debt is expected to increase, with net domestic debt projected to rise by 6.5% of GDP in 2027, compared to 1.7% in 2026. The absence of a significant external maturity in 2027 is expected to reduce the Central Bank's exceptional financing needs. However, this could also lead to increased pressure on the banking system.
Fitch's report highlights the risks associated with Tunisia's high public debt and significant budget deficit. The agency warns that the government's ability to meet its financial obligations could be compromised if it relies too heavily on domestic debt. This could have far-reaching consequences for the country's economic stability.
The recent social tensions in Tunisia have been assessed by Fitch as a limited political risk. However, the agency also notes that the fiscal risk remains high, particularly if the government is forced to increase social allocations and public sector recruitment. This could further exacerbate the country's economic challenges.
The analysis by Fitch Ratings underscores the need for Tunisia to address its underlying economic vulnerabilities. The government must balance the need to meet its financial obligations with the imperative of restoring confidence in the business climate. This will require a comprehensive strategy to promote economic growth and stability.
Ultimately, Fitch's assessment emphasizes that merely meeting financial obligations is no longer sufficient. The government must take steps to restore confidence in the business climate and promote sustainable economic growth. This will require a concerted effort to address the country's underlying economic challenges and create a more favorable investment environment.
Key points
- Fitch Ratings maintains Tunisia's sovereign rating with a stable outlook despite high public debt and significant budget deficit.
