Moody’s downgrades Gabon’s ratings over fiscal, liquidity risks

AFRICAN BUSINESS AND ECONOMYJune 18, 2024 at 8:03 PM UTC

TLDR

Moody's downgrades Gabon's ratings to Caa2 due to fiscal weakness and liquidity risks post-military intervention.
Weaker fiscal position and expansionary policy cited as reasons for the downgrade.
Increase in government financing needs poses liquidity pressures and risks for private sector creditors.

Moody’s Ratings has downgraded Gabon's local and foreign-currency long-term issuer and foreign-currency senior unsecured debt ratings to Caa2 from Caa1, with the outlook changed to stable from negative.

The downgrade reflects a significant deterioration in Gabon's fiscal strength and increased liquidity risks. These issues stem from a weaker fiscal position than initially reported and an expansionary fiscal policy following the August 2023 military intervention, Moody's said.

The transitional government faces new spending pressures as it addresses social and investment demands. The rating agency noted that larger government financing needs will heighten liquidity pressures, with constrained financing options increasing the risk of losses for private sector creditors in the coming years.

Key Takeaways

The rating note further explained that the stable outlook for Gabon reflects a balance of risks at the Caa2 level. The agency highlighted that efforts by the transitional government to improve fiscal data transparency and public finance management could potentially strengthen Gabon's governance, which has historically been a credit constraint. However, Moody's cautioned that without eventual policy adjustments, fiscal and liquidity pressures could escalate, increasing the likelihood of default beyond what is consistent with a Caa2 rating. In addition, the local and foreign currency country ceilings were downgraded to B2 and Caa1 from B1 and B3, respectively.

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