Fitch downgrades Tunisia, cites delayed political transition

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Fitch on Wednesday cut Tunisia’s sovereign rating two notches and warned it could cut further on political uncertainty and its potential damaging economic effects.

The ratings agency cut Tunisia to BB-minus from BB-plus, with a negative outlook.


“The political transition has been further delayed and uncertainty over the ultimate success of the process has increased,” Fitch warned in a statement.

“Attacks and killings by terrorist groups have gained momentum in recent months, worsening security and stability,” the agency added.

More cuts could come if the political crisis intensifies or if budget and current account deficits don’t decrease “significantly,” Fitch said.

Tunisia expects $750 million in loans from the World Bank and International Monetary Fund by the end of 2013 to prop up its fragile public finances and plans an Islamic bond issue early next year.

Tunisia saw the first of the Middle East revolts of 2011 when it overthrew long-time autocratic leader Zine al-Abidine Ben Ali.

But nearly three years later, months of political deadlock have weakened the country’s economic outlook.

The government has agreed to step down soon and make way for a caretaker government, which will govern until elections next year that aim to put the country’s transition to full democracy on track.

Moody’s Investors Service rates Tunisia at Ba2; Standard & Poor’s rates the country at B. All three agencies rate Tunisia’s sovereign debt as speculative.

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