Fitch Ratings has assigned the Republic of Tunisia's forthcoming Eurobond a Long-term foreign currency BBB rating. The rating Outlook is Stable, reported a press release.
The bond is expected to be Euro-denominated and carry a maturity of seven years. The issuance amount is unknown at this time.
The Tunisian economy continues to deliver strong growth. Gross Domestic Product (GDP) growth is estimated at 5.8 percent for 2003, driven by strong agricultural output and buoyant export performance, despite weak growth in its key European markets.
Solid growth has allowed the authorities to continue to pursue gradual fiscal consolidation, and as a result an ongoing reduction in the large public debt burden, which is estimated to have ended last year below 60 percent of GDP. Fitch expects more of the same for 2004.
Growth will be helped by an improving global backdrop and stronger performance in the important tourism sector is also expected for 2004. Prudent policy management should allow the authorities to further reduce the budget deficit this year, and to bring government debt down to around 57 percent of GDP.
Despite solid economic growth, the current account deficit narrowed slightly during 2003, closing the year at an estimated 2.5 percent of GDP. Net external borrowing remained quite high as the government sourced much of its borrowing from abroad, but given solid economic growth and a strong exchange rate external debt to GDP moderated last year to 57 percent of GDP.
The current account deficit will remain benign during 2004, and should be largely financed with foreign direct investment. The government is seeking to increase domestic debt issuance to finance the budget deficit this year and beyond, but will, nonetheless, continue to tap international markets, while it maintains access to official financing.
Further upgrades will hinge on deeper and sustained structural reform, improvements in the banking system and additional industrial restructuring and diversification. The tourism sector will also need stronger investment and restructuring to withstand future challenges and competition.
According to Fitch, it is vital that fiscal consolidation continues apace, as government debt to revenue remains high relative to rated peers. Growing strains in the social security system could pose problems for future fiscal policy, as could the tariff reductions earmarked under Tunisia's association agreement with the EU and the state development banks. — (menareport.com)
© 2004 Mena Report (www.menareport.com)
