LONDON - A sovereign default in Tunisia - though highly unlikely in the next 12 months - could cost the country's banks up to $7.9 billion, S&P Global Ratings said on Tuesday.
Tunisia, which has seen its debt burden rise and economy shrink by 8.8% last year in real terms, started talks with the International Monetary Fund to seek a package of financial assistance.
"Tunisian banks' exposure to their sovereign has more than doubled over the past decade, along with a sharp increase in government indebtedness," said S&P Global Ratings analyst Mohamed Damak.
The cost of default to the banks at $7.9 billion would equate to as much as 102% of the banking system's total equity, or 17.3% of forecast 2021 nominal GDP, S&P added.
(Reporting by Karin Strohecker; Editing by Tom Arnold) ((firstname.lastname@example.org; +442075427262; Reuters Messaging: email@example.com))