Tunis – The American rating agency Standard & Poor’s has downgraded Tunisia from B to BB-. With the country diving into deep political upheaval ever since the assassination of two secular opposition leaders, Tunisia’s now two grades ahead from bankruptcy.
The decision made by S&P reflects the agency’s growing concerns about Tunisia’s financial commitments. According to its statement posted two days ago, Standard & Poor’s Ratings Services lowered its long-term foreign and local currency sovereign credit ratings on the Republic of Tunisia to ‘B’ from ‘BB-’. At the same time we affirmed the ‘B’ short-term sovereign credit ratings. The outlook remains negative.
“We have revised downward our transfer & convertibility assessment on Tunisia to ‘B+’ from ‘BB’.” says S&P. “We also lowered our long-term counterparty credit ratings on the Central Bank of Tunisia to ‘B’ from ‘BB-’, and affirmed our ‘B’ short-term counterparty credit ratings on the bank.”
S&P stated that a reshuffle in the government might lead into a general consensus that will finalize drafting of the constitution and hold elections in 2014. The current economic situation of Tunisia is constrained by the relatively low development rate, unemployment and difficult business environment added S&P.
The GDP (Per capita) is likely to shrink to 1.4%. Earlier S&P estimated Tunisia GDP growth per capita to reach 2.8%. The atrocious omnipresent terrorism threat remain one of the major factors restraining tourism and investment from flourishing in the far-north African country.
Tunisia has sought foreign assistance from IMF earlier this year and received a package loan of $1.3 billion dollar. The ministry of finance said that the loan will help the government shrink the ever increasing budget deficit.
S&P estimates, however, are very pessimistic with regards to the 2013-2016 upcoming peroid. “we believe general government debt will rise from 44% of GDP in 2012 to 50% in 2016. The government’s access to official concessional financing and to the guarantees of Japan and the U.S. for specific bond issues will remain crucial to financing the deficit at a favorable rate” said S&P.
Tunisia fledged economy cannot endure more political crisis. S&P says that “The negative outlook reflects our view of at least a one-in-three chance of a downgrade in the next 12 months if political and social instability hampers the establishment of legitimate and stable institutions, if election results lead to an unpredictable policy framework, or if much-needed international financial support drops.“
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