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Moody's Investors Service has today downgraded the long-term issuer rating of the government of Tunisia to B1 from Ba3 and maintained the negative outlook. Moody's has also downgraded the foreign currency debt rating of the Central Bank of Tunisia to B1 from Ba3 and maintained the negative outlook, in addition to downgrading the shelf/MTN rating to (P)B1 from (P)Ba3. The Government of Tunisia is legally responsible for the payments on all of the central bank's bonds. These debt instruments are issued on behalf of the government.

The key drivers for the downgrade to B1 are:

1) Continued structural deterioration in Tunisia's fiscal strength;

2) Persistent external imbalances;

3) Reduced institutional strength and government effectiveness as highlighted by the track record of delays in the agreed reform implementation program with the IMF.


The negative outlook reflects the risk of a more sustained than anticipated decline in foreign exchange reserves with concomitant depreciation pressures which could fuel adverse public debt dynamics. It also takes into account Tunisia's increasing funding requirements in view of upcoming international bond redemptions starting 2019 amid reduced visibility about access to external funding sources, in addition to rising contingent liability exposures to the public banking sector, to the pension system and with respect to state-owned enterprises (SOEs).


As part of today's rating action, Tunisia's long-term local currency bond and bank deposit ceilings were lowered to Ba1 from Baa2. The long-term foreign currency bank deposit ceiling was lowered to B2 from B1, and the foreign currency bond ceiling to Ba2 from Ba1. The short-term foreign currency bond and bank deposit ceilings remain unchanged at NP.

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