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Tunisia May Sell Debt to Qatar, Needs $5 Billion Financing

Tunisian Central Bank Governor Mustapha Kamel Nabli said his country may sell $500 million in dollar-denominated treasury bills to Qatar as it seeks to secure about $5 billion in external financing this year.

Tunisia, the birthplace of the so-called Arab Spring, will also rely on assistance from the World Bank, the African Development Bank and the European Investment Bank to help plug a balance of payments deficit of about 7 percent of economic output this year, Nabli said today in an interview at the World Economic Forum in Davos, Switzerland.

“It’s a fragile situation,” he said. “We have a lot of concerns. We need growth to come back. We need employment to come back.”

One year after its popular uprising, partly triggered by unemployment, Tunisia has an unemployment rate that Nabli said was more than 18 percent. While he said he “hopes” economic growth will accelerate to 3 percent to 4.5 percent this year, the pace of growth will only lead to “weak” job creation, he said.

Tunisia will repay its 7.375 percent $650 million dollar bond due April 2012, Nabli said, as it seeks to “avoid” selling international bonds after rating companies lowered its credit worthiness following the revolt.

Bond Yield

The yield on the bonds fell 36 basis points, or 0.36 percentage point, this year to 3.37 percent today, according to data compiled by Bloomberg. Tunisia’s credit rating was lowered two levels at Standard & Poor’s in March 2011 to BBB-, the lowest investment grade.

“The international markets aren’t in a good situation right now,” Nabli said. “Our rating has been downgraded, so the cost for us will be relatively high, so if we can avoid it, it would be better.”

Instead, the Qatari government may buy $500 million in a “private placement” of dollar-denominated treasury bills, Nabli said. Asked when he expects the sale, he said: “In two to three months.”

Qatar is the world’s biggest exporter of liquefied natural gas and has one of the world’s biggest sovereign wealth funds. The emirate provided a $500 million grant to Egypt last year to help the country recover after its popular revolt, inspired by the uprising in Tunisia.

Tunisia’s Revolt

The turmoil that followed Tunisia’s revolt brought the country’s foreign-currency reserves to about 10.6 billion Tunisian dinars ($7.1 billion) in 2011, covering 113 days of imports compared with 147 days a year earlier, the central bank said in a statement on Jan. 18.

“It’s comfortable for now,” Nabli said about the reserves. “We are not in a dangerous situation but you have to be careful.”

The Tunisian dinar, which is pegged against an undisclosed basket of currencies, has declined 4.3 percent since Jan. 14, 2011, the day when President Zine El Abidine Ben Ali fled the country. Nabli said the decline in the reserves and the balance-of-payments deficit may lead to “pressure on the exchange rate.”

Tunisia relies on tourism, foreign direct investment and exports to Europe for economic growth. The International Monetary Fund estimates that the economy didn’t expand at all last year.

“There is a lot of uncertainty on the growth rate,” Nabli said. “We know that the European economy is not doing so well, which is critical for our exports, our tourism. We know that international foreign direct investment isn’t very active these days. We have headwinds in front of us.”

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