S&P: Tunisia sovereign default could cost banks as much as $7.9bln

Tunisia, which has seen its debt burden rise and economy shrink by 8.8% last year in real terms, started talks with IMF to seek a package of financial assistance

  
A person holds up a Tunisian flag and shouts slogans during celebrations marking the fourth anniversary of Tunisia's 2011 revolution, in Habib Bourguiba Avenue in Tunis January 14, 2015.

A person holds up a Tunisian flag and shouts slogans during celebrations marking the fourth anniversary of Tunisia's 2011 revolution, in Habib Bourguiba Avenue in Tunis January 14, 2015.

REUTERS/Anis Mili

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) ((karin.strohecker@thomsonreuters.com; +442075427262; Reuters Messaging: karin.strohecker.reuters.com@reuters.net))

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