Fitch downgrades Tunisia due to delayed political transition

The Fitch Ratings building is seen in New York May 7, 2010. REUTERS/Jessica Rinaldi·Reuters· (Reuters)

TUNIS (Reuters) - Fitch on Wednesday cut Tunisia's sovereign rating two notches and warned it could cut further on political uncertainty and its potential damaging economic effects. Tunisia saw the first of the Middle East revolts of 2011 when it overthrew long-time autocratic leader Zine al-Abidine Ben Ali. But nearly three years later, months of political deadlock have weakened the country's economic outlook. "The political transition has been further delayed and uncertainty over the ultimate success of the process has increased," Fitch warned in a statement. The ratings agency cut Tunisia to BB-minus from BB-plus, with a negative outlook, meaning it could eventually cut the rating again. "Attacks and killings by terrorist groups have gained momentum in recent months, worsening security and stability," the agency added. A suicide bomber blew himself up in the Tunisian tourist resort of Sousse on Wednesday, the first such assault in more than a decade in a country now battling Islamist militants. Police also arrested a would-be suicide bomber at former President Habib Bourguiba's tomb in the seaside town of Monastir and detained five others in Sousse thought to be plotting assaults, security sources said. Fitch said more ratings cuts could come if the political crisis intensifies or if Tunisia's budget and current account deficits don't fall significantly. Tunisia expects $750 million in loans from the World Bank and International Monetary Fund by the end of 2013 to prop up its fragile public finances and plans an Islamic bond issue early next year. Tunisia's ruling Islamists and opposition parties started talks on Monday to agree on a new prime minister who will lead a caretaker government. The talks are aimed at ending unrest after the assassination of two opposition leaders by Islamist militants earlier this year. But Fitch said the outcome of the negotiations remains uncertain and elections are unlikely to take place any sooner than the second half of next year. Moody's Investors Service rates Tunisia at Ba2; Standard & Poor's rates the country at B. All three agencies rate Tunisia's sovereign debt as speculative.

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