PARIS: Rating agency Standard & Poor's downgraded debt issued by Tunisia by two notches on Friday because of rising opposition to the government.
Tunisia's opposition have been calling for the resignation of the Islamist-led government and the dissolution of the National Constituent Assembly since the assassination in July of opposition MP Mohamed Brahmi, the second political killing since February.
The credit rating agency downgraded its notation for Tunisian long-term debt from "BB-" to "B", indicating low confidence that the country will be able to respect its debt obligations.
And S&P said the outlook was negative, meaning there was one chance in three that it would lower the rating again in the next 12 months if the economic and social situation threatened reforms to support economic growth.
"We view the popular legitimacy of Tunisia's transitional institutions as increasingly contested, jeopardizing the approval of a new constitution, holding of elections, and implementation of growth-promoting economic reforms," S&P said.
"Furthermore, perceived increased terrorist risks could threaten tourism, which remains a pillar of the Tunisian economy, as well as foreign and domestic investment."
S&P said it estimated that general government debt would rise from 44 percent of gross domestic product in 2012 to 50 percent in 2016.
"The government's access to official concessional financing and to the guarantees of Japan and the US for specific bond issues will remain crucial to financing the deficit at a favorable rate," S&P stressed.
"We expect the support of the international community to remain strong, unless the political transition is suspended indefinitely, which is not our base-case forecast."
The government led by Ennahda party is refusing to step down and has proposed instead the formation of a cabinet of national unity and holding general elections in December.
But the employers' organization UTICA, and the powerful UGTT trade union, are backing the opposition's call for the formation of a government of technocrats.
UTICA reiterated its call on Friday, and urged politicians "to solve the crisis as soon as possible" in order to prevent a further deterioration of the economy.
S&P downgrades Tunisia two notches
