According to the report, the country's credit profile reflects the country's increasing exposure to fiscal and external shocks because of its weak government finances, which are constrained by an extremely narrow revenue base that hinders fiscal consolidation.
It said additional credit challenges stemmed from the political risks around the conflict with
Moody's stated that the COVID-19 pandemic and the associated global downturn severely hurt economies in
It predicted that
The rating agency explained that given containment and prevention measures that constrained the functioning of important economic sectors such as trade, coupled with global spillovers (particularly the sharp drop in international oil prices) that significantly weakened both domestic and external demand, the shock to the economy was most severe in the second quarter of 2020 when it contracted by 6.1 per cent.
It noted that despite an improvement in the third quarter of the year, when the economy contracted by 3.6 per cent in 2020, "overall contraction will represent
"The current shocks will amplify
"In addition, pressure on the fragile balance of payments could intensify, threatening external and macroeconomic stability. In the longer term, the pandemic's impact on growth, particularly in the large informal sector, is still uncertain and could weaken economic strength."
It anticipated that
"However, risks remain given the uncertainty over how long coronavirus-related disruption to the global economy will last. Similar to other African economies,
"Beyond 2021, we currently assume that oil prices will return to a medium-term range of
In his comment, Moody's Vice President - Senior Credit Officer and the report's co-author,
"The country's weak institutions and governance framework also constrain the credit profile and have significantly affected both economic growth and the government's fiscal strength."
On the other hand, the agency stated that
In addition, domestic capital markets are increasingly deep and diversified.
It noted that the negative outlook on
"The outlook would likely move to stable if Moody's were to conclude that the government's fiscal and economic policy response to the coronavirus pandemic is effective in mitigating rising fiscal and external vulnerability risks and limiting the pandemic's long-term negative economic and social implications.
"A rating downgrade would be likely if Moody's were to conclude that the government is unlikely to be able to alleviate the damage to its revenue and its balance sheet, leading to rising liquidity and external risks to levels no longer compatible with a B2 rating," it added.
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