Ratings: Tunisia should unveil clear roadmap to seize international financial opportunities (Expert)

Tunisia will have to disclose a clear roadmap as soon as possible, as international institutions will announce their reports late in October, says  economist Ridha Chkondali, adding  their assessments will generate new international financial opportunities in case Tunisia improves or maintains its sovereign rating.

“The work of the main rating agencies; namely Moody’s, Standard & Poor’s and Fitch Ratings which closely observe the development of the political situation in Tunisia, take into consideration the political aspect and use scientific data to assess and rank the countries,” Chkondali pointed out.

President Kaïs Saïed’s position on Tunisia’s relationship with these rating agencies and fund donors aroused the astonishment of several economic experts, the same source said.

“The Head of State said during Najla Bouden’s new government oath-taking ceremony “the rating agencies cannot give us any grades they want. We are not their students and they are not our teachers,” Chkondali recalled.

 

The expert believed the President of the Republic might have referred to financially-dominated relations that has tied these agencies to the various post-revolution governments in Tunisia. “Both sides have ignored economic policies,” Chkondali pointed out, affirming that Saied’s comments about the need to change the sovereign ratings approach of international rating agencies are not based on any scientific principle.

Speaking to TAP,  the expert provided an analytical reading of the nature of the relationship between Tunisia and international rating agencies as well as international financial institutions.

 

He also put emphasis on the points of divergence between these agencies and ways to restore relations, believing that this could guarantee a sovereign classification which would provide international financial opportunities for Tunisia.

Sovereign rating, a necessity to facilitate loan granting

Chkondali reminded that rating agencies evaluate the ability of debt issuers to meet their financial commitments and determine the countries’ abilities to borrow from international financial markets.

 

These agencies also measure the risk ratio of these countries and the interest rate on government bonds.

The goal is to give foreign investors and international investment funds an overview about the risks of investing in buying bonds in these countries, he underlined.

 

The expert explained that the deterioration of Tunisia’s sovereign rating over the last decade is mainly due to the political instability and the decline recorded in most economic and financial indicators.

He said Tunisia needs to improve these indicators instead of getting involved in unnecessary questions of methodology which could reflect the country’s inability to improve its financial and economic indicators.

Chkondali argued that the new government should send positive messages to these international agencies which are preparing reports on the country’s new ratings.

According to him, conveying positive messages will push these agencies to reconsider their calculation in a bid to improve Tunisia’s sovereign rating or at least maintaining it. This will help reduce the difficulties to mobilise foreign resources deemed necessary for the country’s budget of the country the coming year, he pointed out.

“The President of the Republic must work to set a deadline for exceptional measures and disclose a clear roadmap for the period to come,” he affirmed.

At the economic and financial levels, Chkondali urged Bouden’s government to launch an economic and social dialogue with all political and social stakeholders, as well as with young people so as to develop a detailed programme able to convince the International Monetary Fund (IMF) to relaunch negotiations.

These negotiations will allow Tunisia to prepare the State budget for 2022 under favorable conditions (in terms of foreign and direct financing).

Direct funding: urgent need and vigilance is required

 

In the short term, Bouden government must resolve the tough equation which characterizes the 2021 State budget: the financial gap must be filled without causing a big rise in prices especially that financial solutions seem very limited.

Chkondali believes Bouden government has no other choice but to resort to direct financing from the Central Bank to complete the 2021 budget, explaining that now it is very difficult to borrow from international markets and restart negotiations with the IMF as the process lasts five months.

 

Yet, he reiterated that direct funding should in no way affect Tunisian citizens’ purchasing power.

He called on the government and the central bank to cooperate together so as to devise a funding approach which could address inflation and combat monopoly.

In this particular situation, the expert called on the government to review the central bank’s organic law, namely the monetary policy which makes it possible to increase the interest rates in a bid to fight against rising prices.

 

Source: Tap News Agency