Moody's Investors Service has today downgraded the government issuer rating of the Republic of the Congo to B2 from B1. The outlook is negative.
This concludes the review for downgrade initiated on 4 March 2016 whose purpose was to assess the extent of the impact of the oil price shock on the country's liquidity risk, the government's balance sheet and the credit support offered by its membership of the franc Zone.
The key drivers behind the rating downgrade are:
(i) Moody's expectation that the Republic of the Congo's government balance sheet will continue to deteriorate substantially in 2016-17 amid the oil price shock and a limited fiscal adjustment capacity relative to the scale of the shock.
(ii) Concomitant pressures on the liquidity position of the government which stem from both large net financing requirements, due to large fiscal deficits, and constrained financing options.
Moody's continues to assess the Republic of the Congo's membership of the franc Zone as a significant credit support. Despite growing external imbalances and diminishing foreign exchange reserve levels, the country's external vulnerability remains contained.
Concurrently, Moody's has lowered the Republic of the Congo's country and deposit ceilings to Ba2 from Ba1. The rating downgrade drove the change in ceilings.
