Fitch said in a statement that the country’s credit rating downgrade “reflects uncertainty about Tunisia’s ability to raise sufficient funds to meet its large fiscal needs.”
She explained: “Our main scenario assumes an agreement between Tunisia and the International Monetary Fund by the end of the year, but this is much further than what we previously expected, and the risks are still students”.
According to Fitch, the government’s financing plan relies on more than $5 billion in external financing, the majority of which would be provided by the IMF, meaning it may not be able to provide it in full this year even if an agreement is reached with the fund in the second half of 2023.
However, in the absence of an agreement with the International Monetary Fund, Fitch estimates that Tunisia could obtain external financing worth $2.5 billion in 2023, mainly from Algeria and the African Development Bank. import-export (Afrixim Bank), project loans from multilateral partners, and increasing grants from bilateral partners. However, funding alternatives for next year are still unclear, according to the agency.
Central bank data revealed this week that foreign exchange reserves in Tunisia fell to 21 billion dinars (about $6.78 billion), enough to cover imports for just 91 days, down from 123 days. at the same time a year ago.
“Our base case is that an agreement between Tunisia and the International Monetary Fund is reached by the end of the year, but this is a much later date than expected and the risks remain high,” said Fitch in a statement.
Tunisia is a country burdened with debts of about 80% of its gross domestic product, and the government, which suffers from a liquidity crisis, concluded, at the end of last year, an agreement at the level of the experts with the International Monetary Fund to secure $1.9 billion in funding for 48 months, but political pressure and the government’s inability to push through necessary austerity measures further disrupt the deal final.
Tunisian President Kais Saied rejects the reform program, which calls for the restructuring of more than 100 debt-stricken Tunisian state-owned companies and the lifting of government subsidies on some basic materials, as “dictates”.
Fitch expects the budget deficit to decline from 6.9% of GDP last year to 5.8% this year and then to 4.5% next year, supported by a decrease in the cost of subsidies with lower world prices and stable income levels.
He also expects GDP growth to slow to 1.4% in 2023 from 2.4% in 2022.
European Commission President Ursula von der Leyen is due to travel to Tunisia on Sunday with Italian and Dutch leaders for talks with Saied centered on the issue of migration and the economy.
Its spokesman, Eric Mamer, said: “A cooperation agreement in the areas of economy, energy and immigration will be at the center of the discussions”.
Italian Prime Minister Georgia Meloni visited Tunisia on Tuesday, and his talks with Said focused on the issue of immigration and the country’s economic situation.
A large number of migrants leave Tunisia to reach Italy, which is a gateway to the European Union.
Regarding the issue of illegal immigration, Meloni called, “at European level, for a concrete approach to strengthen support for Tunisia in the fight against trafficking in human beings and illegal immigration, and for a program which includes all funds”, including aid for the deportation of migrants.
Meloni stressed that “the stability of the political and security situation and the advancement of democracy in Tunisia” are “indispensable”.
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