Tunisia to Issue Sovereign Bonds in US Market for Budget Support

USAID Assistant Administrator Mara Rudman and Tunisian Ambassador to the US Mohamed Salah Takaya sign the sovereign loan guarantee on June 8.

Tunisia is looking to raise $400 to 450 million in support of its state budget by selling sovereign debt in the U.S. bond market no later than mid-July.

The decision comes as a direct result of a sovereign loan guarantee agreement signed between Tunis and Washington on June 8 in which the U.S. committed itself to meet up to $30 million of Tunisia’s debt obligations in the event of default.

Yesterday, the committee responsible for finance, planning, and development in the Ministry of Finance approved the agreement for a loan guarantee from the U.S. government to Tunisia in the former’s financial markets. The issuance of these US-guaranteed sovereign bonds will be up for discussion at the Tunisian National Constituent Assembly during today’s plenary session.

According to TAP, the Ministry expressed the need for a swift approval of the U.S.-backed sovereign bonds before the end of June. The ministry has set a benchmark date for itself, to issue the bonds during the second week of July. Tunisia must submit its request to issue its sovereign bonds in the U.S. ten days before it can become effective.

The repayment of Tunisia’s sovereign debt will be scheduled over a period of seven years, based on an interest rate that is equivalent to that imposed on U.S. treasury securities at around 0.5% and 0.75%.

Bank Of America Merrill Lynch and Natixis are the two American banking institutions that will preside over the sovereign loan transaction whose amount will be allocated to the Tunisian state budget. The funds that Tunisia raises through this issuance will be used by the Tunisian government to alleviate the budget deficit that currently stands at 6.6%.