Moody's Investors Service has assigned first-time local and foreign currency issuer ratings of B2 to the Government of Benin with a positive outlook. Moody's also affirmed the senior unsecured foreign currency rating at B2.
The ratings were initiated by Moody's Investors Service and were not requested by the rated entity.
The key drivers supporting the B2 rating are as follows:
1. "Low" economic strength due to the economy's small size, reliance on subsistence agriculture that constrains income levels, and the concentration of exports to one market, Nigeria. The government's development agenda supports robust medium-term growth prospects.
2. "Low" institutional strength, informed by low scores in Worldwide Governance Indicators for government effectiveness, rule of law and control of corruption, and poor fiscal management and absence of effective checks and balances that led to a severe deterioration of the government's balance sheet.
3. "Very Low" fiscal strength, with a relatively high government debt burden although Moody's expects the debt burden to decline as a result of the ongoing fiscal consolidation
4. "Moderate (-)" susceptibility to event risk driven by liquidity risk albeit improving following the government's fiscal consolidation and maturity re-profiling efforts.
The positive outlook reflects the prospect of continued fiscal consolidation and stronger GDP growth through effective implementation of the 'Programme d'Action du Gouvernement 2016-21' (PAG) that could lead to a faster decline in the debt burden, borrowing needs and liquidity risks than Moody's currently expects.
Concurrently, Moody's assigned local and foreign currency deposit ceilings as well as local and foreign currency bond ceilings, all at Ba2.
