With its budget deficit expected to continue, Fitch downgrades Tunisia's sovereign credit rating

Today, Friday, the international credit rating agency, Fitch, downgraded Tunisia’s sovereign rating from “B-” to “CCC”.

The agency said, in a statement, that this rating reflects the increasing financial and external liquidity risks, in the context of further delays in agreeing on a new program with the International Monetary Fund.

Tunisia is seeking a $4 billion rescue package from the International Monetary Fund, while the fund requires Tunisia to achieve consensus and political stability to negotiate the matter.

The agency added that the agreement with the International Monetary Fund requires reducing social opposition and continuous friction with unions, in addition to the government's ability to enact strong fiscal consolidation measures, and expected that Tunisia's budget deficit will continue at high levels in the range of 8.5% of GDP in 2022, Compared to 7.8% last year, 2021.

The agency also expected that the size of the public debt would reach 84.0% of GDP in 2022, and 84.7% in 2023.

She explained that in light of Tunisia's inability to access global financial markets, it will continue to compensate for external financing by borrowing heavily from the domestic market.

She pointed out that Tunisia's increasing dependence on domestic finance and global commodity prices led to a rise in inflation, expecting the average inflation rate to reach about 8% in 2022.

The inflation rate in Tunisia rose last January to 6.7%, compared to 6.6% in the previous December.

Tunisia is witnessing a severe economic crisis, exacerbated by the repercussions of the outbreak of the Corona virus, and the high cost of importing energy and basic materials as a result of the Russian-Ukrainian crisis.

The country is also experiencing a political crisis, against the background of President Kais Saied taking, on July 25, exceptional measures, most notably freezing the competencies of Parliament, issuing legislation by presidential decrees, dismissing the government, and appointing new ones.

The majority of political and civil forces in Tunisia reject these measures, and consider them a coup against the constitution, while other forces support them, seeing them as a correction to the course of the 2011 revolution, which overthrew then-President Zine El Abidine Ben Ali.