The rating agency Moody’s followed suit with Standard & Poor’s, giving its first rating to Togo. This is a B3 with a stable outlook for the West African country that is preparing to raise 500 million euros in international financial markets.
Togo’s economic strength is rated as “low (-)”; it is at least the first of the main factors mentioned by Moody’s. This situation is due to very low levels of income, but also competitiveness and diversification, which will continue, in the medium term, to limit the absorption capacity of the shocks of the Togolese economy despite sustained growth.
The agency also supports its rating by a “very weak” institutional solidity, justified by very weak international governance indicators and a track record reflecting a limited ability to implement fiscal policies, reflected by the accumulation of payment arrears. and debt. “While the IMF program has, in recent years, fostered the anchoring of Togo’s fiscal and economic policy, its institutions remain very fragile on a global scale,” she says.
In addition, Moody’s considers “very weak (+)” the solidity of Togo’s public finances, reflecting a high public debt and a sharp increase since the debt relief granted to it in 2010. “According to its reference scenario Moody’s anticipates, as in 2017, a gradual decrease in the ratio of public debt to GDP. Nevertheless, while it stood at 27% in 2010 thanks to debt relief granted to the Togolese government under the Heavily Indebted Poor Countries Initiative, the level of debt has more than doubled in seven years and will remain high, “writes the rating agency.
The fourth key factor on which Moody’s relies is the “moderate” (+) “exposure to event risk related to domestic political risk and government liquidity risk. “The first risk is above all that of disruptions likely to hinder the proper functioning of the economy and the government in the event of a sudden rise in social protest. The second is related to the importance of gross financing needs – nearly 15% of GDP – knowing nevertheless that Togo enjoys access to financing relatively stable and, on the whole, sufficient, “says Moody’s.
“The outlook is stable, reflecting the Moody’s benchmark scenario which anticipates a gradual decline in the debt-to-GDP ratio as well as refinancing, at sustainable cost, of the significant debt maturities owed by the creditors of the Economic and Monetary Union. West African Monetary Union (WAEMU) in 2020 and 2021. “, adds the agency which, in addition, sets at Ba3, all ceilings for deposits and for bonds in local currency and currencies.
This rating is announced a few days after the publication of Standard & Poor’s. The latter had given Togo, at the end of May 2019, a short and long-term “B” note in foreign and local currency.
As a reminder, Togo will soon issue an eurobond of 500 million euros to settle part of its domestic debt.
