Moody's Investors Service, has affirmed the Government of Republic of the Congo's (ROC) Caa2 long-term issuer ratings. The issuer outlook remains stable.
The main drivers of today's action are the very weak state of ROC's public finances as well as poor public governance, that have manifested in missed debt service payments in the past and a need to restructure several outstanding debts. Moody's expectation remains that market debt owed to private creditors, which is a very small fraction of ROC's high debt burden, is unlikely to be involved in debt restructuring. However, risks of missed payments due to private creditors as a result of weak liquidity management and position remain, despite an IMF programme. Moody's issuer rating also speaks to material default risks regarding any potential future private sector debts.
The Republic of the Congo's local currency country ceiling remains unchanged at B2, maintaining the existing gap with the sovereign rating. The three-notch gap reflects ROC's membership to the Central African Economic and Monetary Union (CEMAC) and support from stronger members of the union, which mitigates the risks associated with ROC's weak institutions and external imbalances. The foreign currency country ceiling also remains unchanged at Caa1, two notches below the local currency country ceiling. This reflects relatively limited transfer and convertibility risks, given the French Treasury's guarantee of the peg of the CFA franc to the euro, as part of the CEMAC membership.
