Tunisia bonds jump after IMF staff-level agreement on $1.9 bln loan

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Tunisia’s international bonds jumped as much as 4 cents to hit multi-month highs on Monday after the International Monetary Fund said it had reached a preliminary agreement for a $1.9 billion loan, potentially paving the way for more funding.

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Euro-denominated bonds issued by the central bank chalked up the biggest gains, with the 2023 bond up 4 cents in the euro to trade above 82 cents, Tradeweb data showed. Dollar-denominated bonds also rose, with the 2027 issue up 2.8 cents in the dollar to be bid at just over 64 cents.

The IMF announced on Saturday that the 48-month rescue package could be finalized in December for the country that is engulfed by a political and economic crisis amid fuel and food shortages.

Analysts at Morgan Stanley said in a note to clients that the staff level agreement would provide a fiscal anchor and was a “welcome relief.”

Morgan Stanley said Tunisia securing a three year wage agreement with the powerful UGTT labor union, adjusting fuel prices in September as well as a reduction on its fiscal deficit had helped pave the way for an agreement with the fund.

“Once board approval is given, presumably in December 2022, this should allow Tunisia to access funding from the Resilience and Sustainability Trust,” the note said, which would add another $1 billion in funding.

Tunisia has been in urgent need of international help for months, as it grapples with a crisis in public finances that has raised fears it may default on its debt and has contributed to shortages of food and fuel, according to government critics.

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