Fitch Ratings Upgrades Tunisia's Sovereign Rating
Fitch Ratings upgraded Tunisia's sovereign rating from "CCC+" to "B-" with a stable outlook on Friday. This decision reflects the improvement in the country's external position and the resilience of its financial flows, while highlighting the persistent vulnerability of the budget and debt to external shocks.
Economic Outlook
According to Fitch, the current account deficit is expected to reach 2.2% of GDP in 2025, compared to 1.5% in 2024, before stabilizing at 2.8% in 2027. This level remains significantly lower than the average of 7.9% observed between 2010 and 2022. The improvement is mainly due to a strong increase in the services balance, from 10% of GDP in 2018 to 14% in 2023 and 2024, as well as an increase in remittances from the diaspora, from 4% of GDP in 2018 to 6% in 2023-2024.
Foreign Investment and Financing
Net foreign direct investment (FDI) reached 1.4% of GDP in 2024, after an average of 2.1% of GDP between 2010 and 2019. Fitch anticipates a rebound in 2025, with a 54% increase in US dollars in the first half compared to the same period in 2024. Meanwhile, disbursements from multilateral and bilateral partners amounted to 2.2% of GDP in 2024 and are expected to be maintained until 2027, supporting external liquidity and international reserves.
Debt and Financing Needs
Despite these inflows, Tunisia still experiences net outflows of external financing. Fitch estimates that they should decrease from -3.7% of GDP in 2024 to -1% in 2027. The country must repay its only remaining Eurobond, worth €700 million, by July 2026. International reserves are expected to reach 3.9 months of external payments in 2027, compared to 4.5 months in 2024, a level considered sufficient to cover external obligations.
Budget and Debt
Budget financing needs remain high but are expected to decrease gradually. Fitch forecasts a decrease from 18% of GDP in 2024 to 16% in 2025, 15% in 2026, and 13.5% in 2027, excluding refinancing of short-term debt. The central bank has provided zero-rate loans equivalent to 4.4% of GDP in 2024 and 4.1% in 2025, with a ten-year maturity and a three-year grace period, supporting the stability of domestic amortization.
Public Debt and Expenditure
External debt amortization is expected to decrease from 5.8% of GDP in 2024 to 3.8% in 2027. The public wage bill, which is stable, represents 13.9% of GDP in 2024 and is expected to reach 13.5% of GDP in 2027. The cost of subsidies is expected to decrease by 0.6 percentage points of GDP in 2026, due to a hypothetical decrease in raw material prices.
Public Debt and ESG Factors
Public debt remains high but stable, decreasing from 84.5% of GDP in 2024 to 83% in 2025. However, Fitch highlights the rigidity of the budget and the strong dependence on salaries, interest, and subsidies, limiting the room for maneuver in the face of external shocks and fluctuations in global prices, particularly for oil.
From an ESG and governance perspective, Fitch assigns Tunisia a relevance score of 5 for political stability, the rule of law, and corruption control, a score of 4 for human rights and political freedoms, and a score of 4+ for creditor rights. These factors weigh on the rating and reflect the consideration of institutional factors in the sovereign rating model.
Outlook
Fitch specifies that the rating could be revised upward if Tunisia manages to durably reduce its deficit and increase its foreign exchange reserves. Conversely, a widening of the deficit or a rapid decline in reserves could lead to a risk of downgrade.
