Moody's downgrades Niger's rating but changes outlook to stable
TLDR
- Moody's downgrades Government of Niger's long-term foreign and local currency issuer ratings from Caa2 to Caa3 due to payment arrears and sanctions imposed by ECOWAS and WAEMU.
- Accumulation of payment arrears on debt service and restricted cross-border payments indicate potential higher losses for private sector creditors.
- Sanctions implemented after the July 2023 military coup exacerbates economic challenges, impacting the government's ability to fulfill future debt obligations.
Moody's Investors Service ("Moody's") has downgraded the Government of Niger's long-term foreign and local currency issuer ratings from Caa2 to Caa3. Additionally, the outlook has been revised from negative to stable.
This downgrade reflects the ongoing accumulation of payment arrears on debt service due to sanctions imposed by the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (WAEMU), which have restricted cross-border payments. These circumstances indicate potential higher losses for private sector creditors compared to Moody's previous assessments.
Furthermore, the sanctions implemented since the conclusion of July 2023 in response to the military coup have exacerbated economic challenges, further impeding the government's ability to fulfill its debt obligations in the future.
Key Takeaways
The military-led Government of Niger has signaled its plans to exit from the Economic Community of West African States (ECOWAS), adding to the uncertainty surrounding the potential duration of sanctions. In parallel, financing risks are escalating. With the persistence of sanctions, the government continues to heavily rely on the domestic banking system for its primary source of funding. Despite temporary forbearance measures announced by the regional central bank to mitigate immediate losses on banks' balance sheets, the eventual acknowledgment of bond impairment could constrain domestic banks' capacity to refinance Nigerien bonds with the regional central bank. Consequently, this would restrict banks' ability to fulfill the government's financing requirements.
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