Bank Of America plans Tunisian debt restructuring at Paris Club

BofA Securities, formerly Bank of America Merrill Lynch or BAML and which is the branch in charge of 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.

Supplementary 2021 budget highlights funding crunch set to intensify in the absence of reforms and an agreement with IMF, report predicts external financing gap could reach $ 1.9 billion US dollars equivalent to 5.6 billion dinars (4.3% of GDP) for the fourth quarter of the current year, which could lead to delinquencies and shortages of imports.

We also note 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.

In addition, the US bank report considers that the absence of a clear anchor point for economic policy decreases the chances of success of an International Monetary Fund (IMF) credit program, at least. 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 said. .

It was observed, moreover, 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 respect, in particular after the visit of the Head of Najla Bouden government in Saudi Arabia.

Any bilateral support provided to Tunisia can only be considered in a possible future restructuring of the public debt carried out as part of the Paris Club process and this could therefore have a blocking effect on the economic level, assures the BofA Securities report.

Let us recall that the Bank Of America classified at the end of last October in the row “very high risk” in default of payment of credit.

The risk of default on Tunisia’s sovereign debt, which has been judged to be “A very probable situation”, is partly explained by the histogram below which represents an IMF projection over 15 years of the schedule of the external debt of the Tunisian State. It is stressed that the external debt is very high for the six years which will follow 2021, and probably, referring to the prospects of the current social, economic and political situation of Tunisia, the external debt will be higher and Tunisia will be in default position, if no initiative to implement corrective actions is taken.

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