Fitch lowers Tunisia credit rating for not implementing 'IMF program'

By Al Mayadeen English
Source: Agencies
11 Jun 2023 10:17

The global credit rating institution says that failure to implement the IMF program prevented Tunisia from receiving of the "necessary" finances.

International Monetary Fund IMF Chief Economist Pierre Olivier Gourinchas speaks during an interview with AFP at the IMF headquarters in Washington, DC, on July 26, 2022 (AFP)

Tunisia's credit rating was downgraded by Fitch on Saturday as the country faces a deep economic crisis that has caused a recurrent lack of basic necessities in recent years. The global credit agency said that "The downgrade to 'CCC-' [from CCC+] reflects uncertainty around Tunisia's ability to mobilize sufficient funding to meet its large financing requirement."

“This reflects the failure to implement prior actions for an agreed IMF program, which would be necessary to release the associated bilateral financing that underpinned Tunisia's financing plan,” the statement added.

“The government financing needs will be high at around 16% of GDP in 2023 (about $7.7 billion) and 14% of GDP in 2024 ($7.4 billion), well above the 2015-2019 average of 9%, and one of the highest of 'C'/'D' rated peers."

The financial rating firm said it expected the current deficit to fall to 7 percent of Tunisia's GDP in 2023, and 6.5 percent in 2024 from a staggering 8.5 percent in 2022. Fitch also forecasts that the country's GDP will witness a 1.4 percent decrease this year, down from 2.4 percent in 2022.

“The improvement will be driven by a significant recovery of tourism receipts, largely off-set by deepening energy and food balance deficits, despite the decrease in international prices,” it added.

The International Monetary Fund (IMF) announced in October 2022 that it had reached an agreement with Tunisia to provide it with a loan of $1.9 billion. However, the loan was rejected by the IMF board, which led to its dismissal.

The Fund has pushed Tunisia to remove subsidies on basic goods, particularly fuel, and "reform" state-owned companies.

Tunisian President Kais Saied denounced in April the "diktats" imposed by the IMF that will result in "more poverty" and deemed them "unacceptable". "It's true that some people who don't need subsidies are benefitting from them, but we can find other ways to make sure they get to those who deserve them," Saied said.

In June 2022, the head of Tunisia's UGTT trade union confederation, Noureddine Taboubi, also rejected conditions set by the IMF. "We reject the conditions set by the IMF, given Tunisians' low salaries, lack of means, rising poverty and unemployment," Taboubi said then.