ISTANBUL

Fitch Ratings said Monday that it upgraded Tunisia's long-term foreign currency issuer default rating to “CCC+” from “CCC-.”

The rating agency said the upgrade reflects the country's stronger external position and the government's ability to meet its large fiscal financing needs.

Those factors, however, are balanced against limited access to external financing, uncertainty over the ability and willingness of the banking sector to take on large volumes of domestic debt, and a budget that remains vulnerable to external shocks.

Fitch said the Tunisian government requires 10% of GDP in long-term domestic financing this year and 10%-12% in 2025 and 2026.

"We believe the domestic banking sector could help meet the sovereign's financing needs, as deposit growth and weak credit demand support sector liquidity," the rating agency said in a statement.

"Nevertheless, this will increase banks' exposure to the public sector, which already represents about 20% of the banking sector's total assets, necessitating refinancing to local banks by the central bank," it added.