• Moody’s affirms Tunisia’s Ba3 rating
  • Its outlook is improved to stable
  • Decision prompted by successful democratic transition and government’s planned reforms

Washington-based Moody’s Investors Service has improved Tunisia’s outlook from negative to stable.

The government’s bond issuer rating was affirmed at Ba3.

The ratings agency upgraded local-currency bond and deposit ceilings to Baa2 from Baa3, as a result of better economic and institutional strength. Foreign currency ratings remained the same.

Moody’s cited Tunisia’s successful democratic transition as the main reason for improving the outlook.

“The success of the democratic transition is a visible achievement,” Elisa Parisi-Capone, associate vice-president and analyst at Moody’s, told MEED. “The new government can take ownership of the reform process. Previous governments had a temporary aspect that prevented long-term visibility.”

Moody’s does not see the recent spate of strikes and sit-ins in the country as a major issue, although the security situation is a challenge.

Tunisia also has better access to finance from development banks and donors, including the Washington-based IMF. The well-received $1bn bond-issuance in January showed that investor confidence has improved.

However, the IMF announced earlier in May that it is extending the next $600m tranche of the $1.7bn stand-by agreement by seven months. This is to give the government an opportunity to push through banking and fiscal reforms.

Moody’s also predicts that Tunisia’s external debts, which it estimated at 55.6 per cent of GDP in 2014, will stabilise. It bases this on the reform programme, a recovery in exports and oil prices remaining low.

It expects the fiscal deficit to increase from 4.9 per cent of GDP in 2014 to 5.3 per cent in 2015, before declining to 4.2 per cent in 2016.

However, if bank recapitalisation and reforms are delayed, the rating could be downgraded.

Stay informed with the latest in the Middle East
Download the MEED app today, available on Apple and Android devices