Rating agency Moody's, on Tuesday evening, said it has placed on review for downgrade the Caa1 long-term deposit ratings of five Tunisian banks.

They are the Arab Tunisian Bank ("ATB"), Amen Bank ("Amen"), Banque de Tunisie ("BdT"), Banque Internationale Arabe de Tunisie ("BIAT") and Societe Tunisienne de Banque ("STB").

The rating agency also said it has placed on review for downgrade the Baseline Credit Assessments (BCA) and Adjusted BCAs of Amen, ATB, BdT and BIAT. It has affirmed the caa3 BCA and Adjusted BCA of STB.

Moody's argues that Tunisia's large fiscal and external imbalances and elevated refinancing risks represent significant credit weaknesses for the government, which, alongside social tensions, have been exacerbated by the global implications of the Russia-Ukraine conflict.

Moody's plans to focus on evaluating the authorities' progress in securing Executive Board approval of a new IMF programme it deems " key to alleviating financing and external vulnerability risks, and ultimately social risks, before the end of the year.

This new programme could, according to the agency, increase the likelihood of maintaining sufficient official financing sources in the coming years to avert a balance of payments or fiscal crisis with negative social implications.

In addition, the agency expects this difficult operating environment characterized by low economic growth, inflationary pressures, low private investment and delayed structural reforms to impact the banks' credit growth and profitability whilst funding and liquidity remain tight.

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