On March 8, 2019, S & P Global Ratings confirmed the long-term foreign currency notes “B-” and short-term foreign exchange and local currency “B” of the sovereign debt of Congo-Brazzaville. The perspective is stable.
The agency estimates that the external and budgetary vulnerabilities of Congo-Brazzaville will remain important in the years to come.
Good news though, S & P believes that Congo’s default risk on its single Eurobond has declined.
The stable outlook reflects “our expectation of lower external and fiscal pressures over the next 12 months while taking into account persistent institutional and economic risks,” says S & P.
The agency could lower the ratings if, for example, new remedies were brought before foreign courts or if institutional mismanagement prevented full and timely payment to investors, or if external and fiscal pressures increased significantly.
On the other hand, S & P could raise the ratings if Congo-Brazzaville’s external and budgetary balances improved well beyond its forecasts and if the legal and institutional risks of default in payment vanished.
The country’s strong economic, external and fiscal dependence on oil makes it particularly vulnerable to a sharp drop in prices. The very low institutional efficiency of Congo also weighs on the ratings.
The ratings are nonetheless supported by our forecasts that the default risks on the single Eurobond in Congo-Brazzaville have decreased. “We also believe that Congo-Brazzaville’s membership of the Economic and Monetary Community of Central African States (CEMAC) reduces the country’s own external risks and keeps inflation low, even if it limits its monetary flexibility, “says S & P.
