"We are now focusing on what we saw before the pandemic, which is whether the government will be able to refinance short-term debt and reduce financing needs, thus giving more flexibility in the options," said the director of the sovereign risk analysis group at Moody's financial rating agency.
In an interview with Lusa, Marie Diron explained that the two downgrades carried out last year resulted from the increase in the debt-to-GDP ratio following the covid-19 pandemic, and stressed that the depreciation of the currency was important for the evolution of public accounts.
"We went down from B3 to Caa1 at the time when currency was significantly pressured due to currency liberalization, which automatically translated into a higher debt burden, around 100 percent of GDP, and during the pandemic and the oil shock in 2020, we saw a period of government efforts to restructure debt and pay down short-term debt, reducing financing needs," Marie Diron recalled.
"The decline in oil prices made this exercise more difficult, but now with the recovery in oil prices there is more fiscal space, and we anticipate this year's budget to be balanced, with an easing of pressure on the currency," the analyst pointed out.
Moody's looks at 28 countries in Africa, ranging from A3 from Botswana to Ca from Zambia, and there is a concentration of opinion on credit quality more at the lower end of the scale, "reflecting constraints due to low income levels that make it difficult to be resilient to shocks, fiscal constraints and debt, which was already rising even before the pandemic," said Marie Diron, noting that two-thirds of the outlook 'ratings' are stable.
"This indicates that our view on sovereign credit quality is well positioned for a very gradual and uneven recovery period, with governments needing time to regain their revenue base," the analyst concluded.
