LONDON – Hard-currency bonds issued by Tunisia’s central bank dropped sharply on Monday after the dismissal of the government by the country’s president left it facing its biggest crisis in a decade of democracy.
The 2027 and 2024 bonds both fell more than 5 cents to their lowest in more than a year, with the former slumping to 86.57 cents, Tradeweb data showed according to Reuters.
The 2025 dollar-denominated issue slipped 4.8 cents to trade at 83.88 cents in the dollar, its lowest level in more than 14 months, the data also showed.
President Kais Saied said he would assume executive authority with the assistance of a new prime minister in a move his opponents labelled a coup. This is the biggest challenge yet to the democratic system Tunisia introduced in a 2011 revolution.
“President Said’s decision to freeze legislative work has brought Tunisia to a new constitutional crisis that is far more acute, in our view, adding heightened risks to political and social volatility in coming weeks,” Barclays analysts Brahim Razgallah and Michael Kafe wrote in a research note on Monday.
Five-year credit default swaps for Tunisia’s central bank reached 751 basis points, up one basis point from Friday’s close, IHS Markit data showed. The level has almost doubled from a year ago.
Tunisia’s outlook depends in part on its ability to secure fresh financing from the International Monetary Fund. Tunisia is seeking a three-year $4 billion loan to help to stabilise its balance of payments position after its current account deficit widened to 7.1% of GDP last year.
In a report in May, credit rating agency S&P said a sovereign default could cost Tunisian banks between $4.3 billion-$7.9 billion, equivalent to 55%-102% of the banking system’s total equity or 9.3%-17.3% of forecast 2021 nominal GDP.
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