S&P drops Tunisia rating to speculative

Standard & Poor's dropped its rating for Tunisia by one notch on Wednesday to a speculative 'BB/B' level due to political uncertainty and weaker economic outlook. "Despite overall stability and consensus since the removal of President Ben Ali in early 2011, we believe pronounced medium-term policy uncertainties will persist, at least until Tunisia adopts a new constitution and elects a government," the ratings agency said in a statement. "We do not expect this before mid-2013," S&P added. It gave the rating a stable outlook, however, as despite the uncertainty it expects the political transition will proceed without violence. S&P added that Tunisia's economic, fiscal, and external indicators -- both in reported data and in its revised forecasts -- are now weaker than it previously anticipated. Moez Abidi, a board member at Tunisia's central bank, argued the downgrade should be put into perspective as Tunis largely counts on "bilateral and multilateral loans" for its state financing needs. Tunisia goes to the markets for only about a third of its total debt, Abidi said. While the ratings action could hurt Tunisia during loan negotiations, "I don't think it will influence partners who deal with Tunisia on a regular basis," the central banker said.