Moody's Investors Service has downgraded the Government of the Democratic Republic of the Congo (DRC) issuer rating to Caa1 from B3 and changed the outlook to stable from negative.
The decision to downgrade the rating reflects Moody's assessment that the capacity of the country's policymaking institutions to respond to economic or political shocks is very weak. Although DRC's debt burden is low, even a moderately severe shock could raise the risk of default given very low income levels and the large and dispersed population reliant on poor infrastructure. Possible sources of such a shock remain those identified in the rating action in 2017, relating to commodity prices, impairment of major commodity production facilities, or -- notwithstanding the apparent calm following the recent elections -- renewed political tensions.
The stable outlook corresponds to balanced risks at the Caa1 rating level. On the one hand, with a very low government debt burden, the probability of default remains quite low. Conversely, the institutional and economic weaknesses characterising DRC's credit profile pose significant challenges to the government and are unlikely to alleviate significantly in the near future.
The long-term local-currency bond and deposit ceilings remain unchanged at B3. The long-term foreign-currency bond and deposit ceilings remain unchanged at B3 and Caa1, respectively.
