Fitch downgraded Tunisia’s credit rating today to CCC, indicating a substantial default risk.

The New York-based credit agency said in a press release that the rating reflects “heightened fiscal and external liquidity risks” in the North African country. Fitch’s ratings reflect the ability of an entity to meet its financial commitments, which includes the repayment of debt. 

Why it matters:  Fitch gave several reasons for its bearish outlook on Tunisia. One is that the Tunisian government has so far failed to agree on a new loan program with the International Monetary Fund. The rating agency said a new program is “necessary for access to most official creditors' budget support” following the “political changes of July 2021,” in a reference to President Kais Saied’s power moves last year. In July, Saied sacked the country’s prime minister and suspended parliament following protests against the government, which was led by the Islamist Ennahda party. Ennahda was the largest party in parliament and held the Prime Ministry before the move. Saied’s actions have been widely described as a “coup.” 

Saied subsequently continued to consolidate his power. In September, he signed a presidential decree giving himself sweeping executive and legislative powers, which added to the coup fears, Stephen Quillen reported for Al-Monitor that month. The suspension of the parliament remains in effect.