A first – Bank of America: Business difficulties could disrupt imports and increase debt

BofA Securities, formerly Bank of America Merrill Lynch or BAML and which is the branch responsible for the investment banking activities of Bank of America has just published a report on the situation of public finances in Tunisia.

The bank is considered a benchmark in the United States and internationally in advisory and risk management.

The key takeaways from the report revolve around the 2021 revised budget highlighting a financing squeeze that is expected to intensify in the absence of reforms and an agreement with the IMF, the forecast of ” an external financing gap of around 4.3% of GDP at the end of 2021 and the observation that the monetization of this gap would double the rate of central bank financing compared to 2020 and accelerate the decline in foreign exchange reserves.

The American bank report considers, moreover, that the absence of a clear anchor point for economic policy reduces the chances of success of a credit program from the International Monetary Fund (IMF). less in the short term. While it is important that President Kais Saied appears to have given the green light to formally initiate program talks with the IMF, the government’s room for maneuver remains uncertain, in part due to the ongoing political transition, BofA says. .

It was also observed that regional financial support to Tunisia seems unlikely in the short term and this is evidenced by the lack of expression of interest, in this regard, especially after the visit of the Head of Government. Najla Bouden in Saudi Arabia.

Nevertheless, the American bank underlines that the difficulties of the companies could disrupt the imports and increase the public debt.

From this same perspective, the Bank of America reports that according to the IMF, the 30 largest state-owned enterprises (SOEs) had a debt of 40% of GDP in 2019 and that the debt guaranteed by state-owned enterprises was rising. to 15% of GDP by mid-2020.

The sharp increase of 3.2 billion US dollars equivalent to 9.3 billion dinars in short-term external debt, mainly unsecured trade credits, by public enterprises in 2019 increases the risks of short-term rollovers , we say. This happened against stable import growth that year, thus increasing foreign exchange reserves, says the Bank of America report which states that the need to increase the share of imports of state-owned enterprises financed by trade credits could suggest a weakening of their financial profile.

The bank therefore notes that many state-owned enterprises are facing financial difficulties, according to local press reports, moreover, they are exposed to currency risk and many of them are likely to sell locally imported products at low prices. subsidized.

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