Economist Highlights that Rating Upgrade Depends on External Factors, Calls for Urgent Structural Reforms
The financial rating agency Fitch Ratings announced on Friday, September 12, 2024, that it has upgraded Tunisia's sovereign rating from "CCC+" to "B-", while maintaining its outlook as "Stable". This decision, welcomed by the authorities, remains conditional on the continuation of structural reforms, particularly those related to subsidies and the public wage bill.
Improvement Driven by the External Sector
This positive revision is mainly based on the improvement of the country's external balances. The current account deficit has narrowed, supported by the decline in international prices of hydrocarbons and food, as well as the increase in transfers from Tunisians living abroad and the recovery of the tourism sector. These factors have enabled the country to strengthen its foreign exchange reserves and ensure sufficient external liquidity.
Multilateral and bilateral partner financing has also played a stabilizing role in maintaining access to essential liquidity, despite the closure of international financial markets to Tunisia.
Persistent Structural Weaknesses
Despite this improvement, Fitch warns against the structural vulnerabilities that continue to constrain Tunisia's rating. The very limited access to international financial markets, the fragility of public finances, and the dependence on external shocks to commodity prices remain concerns.
The agency emphasizes that the absence of profound reform of the subsidy system and the public wage bill exposes the country to a risk of rapid deterioration in the event of a reversal of the international economic situation.
Reforms: An Imperative Necessity to Consolidate Gains
Economist Ridha Chkandali, interviewed on the subject, welcomed this decision while calling for great caution. "This improvement is more related to external conjunctural factors than to a profound reform of the economy. If Tunisia does not resolutely engage in the expected reforms on subsidies and public salaries, this rating could be called into question as soon as the next economic shock," he explained during his appearance on Express Fm.
He also stressed the need to clarify the economic discourse and harmonize messages between different institutions to reassure both markets and the population.
Reduced Room for Maneuver
Although the rating has improved, Tunisia remains in the "speculative" category, with a substantial risk of default. The country must therefore continue its efforts to regain the confidence of international investors and secure permanent financing for its economy, either through an agreement with the IMF or by issuing debt on international markets.
The next Fitch rating, expected in the coming months, will be crucial and will largely depend on the government's ability to capitalize on this opportunity by implementing the necessary structural reforms.
