Summary:

On 28 February 2025, international credit rating agency, Moody’s, raised Tunisia’s sovereign rating from Caa2 to Caa1 with a stable outlook marking the first improvement in the country’s credit rating in over a decade.  

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Moody’s indicated that this improvement is due to the reduction in the external debt of Tunisia’s private sector and the ability of the Tunisian Central Bank to maintain stable foreign exchange reserves over the last two years, supported by historically low current account deficits. 

According to Moody’s, Tunisia’s external financing needs are now lower and better covered by foreign exchange reserves. The continued reduction in budget deficits also contributes to the reduction in repayment risk despite certain financing constraints. 

According to Professor of Economic Sciences Mouez Soussi, review of the rating was driven by Tunisia’s improved management of foreign debt, the stability of foreign exchange, and the level of hard currency reserves especially after the state borrowed from the Central Bank of Tunisia. Soussi also noted the gradual decrease in the budget deficit to below six percent.  

Outlook: 

While Moody’s review reflects some short-term improvements, this rating remains temporary and does not obscure that the Caa1 rating indicates “very high credit risk” and “poor standing,” according to Moody’s rating system.  

The ability of the Tunisian economy to respond to shocks will continue to be limited due to high debt levels. Additionally, government financing remains dependent on the Central Bank which creates an increasingly precarious situation in which the government is borrowing from itself. 

Without deeper structural reforms, the country’s financial vulnerabilities could persist, making long-term stability uncertain. 

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