Republic of Congo pays the price for its default

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Fitch Ratings has affirmed the Republic of Congo’s Default Ratings (IDRs) at ‘CCC’ but downgraded the country ceiling to ‘B+’ from ‘BBB-‘. Fitch noted major weaknesses in governance, public finances and in financing the deficit. More specifically, Congo’s temporary failure to pay interest and principal of USD17m (0.2% of GDP) on a Eurobond mid-2016 is indicative of fragile public debt management. Fitch’s assessment of the country’s financial profile was not flattering: “…low non-oil revenues, poor data quality and transparency, and a poor track record of debt repayment…”

That said, Fitch acknowledges the Congolese economy should recover in 2017 on account of a large new oil field which comes on stream. Expectations for higher oil prices will also positively impact Congo’s credit metrics next year. Diversification of the economy away from oil (which accounted for more than 50% of GDP in 2014) remains a long-term prospect, despite heavy investment in infrastructure and potential in agriculture and mining.


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