New York, June 12, 2020 -- Moody's Investors Service, ("Moody's") has
today placed the Government of Côte d'Ivoire's Ba3 foreign
and local currency long-term issuer, and foreign-currency
senior unsecured ratings on review for downgrade. Moody's
also affirmed the short-term issuer rating at Not Prime (NP).
The decision to place Côte d'Ivoire's ratings on review for
downgrade reflects Moody's assessment that the country's participation
in the G20 Debt Service Suspension Initiative (DSSI) raises the risk that
private sector creditors will incur losses. The suspension of debt
service obligations to official creditors alone would be unlikely to have
rating implications. However, the G20's call on private sector
creditors to participate in that initiative on comparable terms raises
the risk of default on privately-held debt under Moody's
definition.
The government has stated its commitment to comply with all of its contractual
obligations vis-a-vis private sector creditors and does
not intend to extend the DSSI to them. However, this contrasts
with a call by the official sector for commercial creditors to contribute
to debt service relief.
Consistent with Moody's approach globally, the review period
will allow Moody's to understand the significance of the statement in
the DSSI term sheet that private sector creditors should participate on
comparable terms. The review will assess whether Côte d'Ivoire's
participation in that initiative will indeed be implemented without private
sector participation, in which case the rating will likely be confirmed
at the current level; or, if not, what lower rating would
be consistent with expected losses.
The foreign-currency and the local-currency bond and deposit
ceilings remain unchanged at Baa3.
RATINGS RATIONALE/ FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE
OF THE RATINGS
REVIEW FOR DOWNGRADE WILL ASSESS CREDIT RATING IMPLICATIONS OF ACCESSING
G20 DEBT SERVICE SUSPENSION INITIATIVE (DSSI)
On 10 June, the government of Côte d'Ivoire announced
its participation in the G20 DSSI seeking official sector debt service
relief. Suspension of debt service obligations to official creditors
alone would be unlikely to have rating implications; indeed,
relief from official debt service obligations would allow fiscal resources
to be devoted to essential health efforts and social spending due to impact
of the coronavirus outbreak. However, the G20 has called
on private sector creditors to participate in that initiative on comparable
terms.
Moody's expects a significant slowdown in growth this year,
with GDP growth failing to 1.9% in 2020 against 7.3%
in 2019; and a widening in the fiscal deficit estimated to 6.8%
of GDP from 3.0% in 2019. Lower growth and wider
fiscal deficits will contribute to a higher debt burden, that Moody's
projects to rise to 56.1% of (non-rebased) GDP in
2020, versus its pre-crisis forecast of 51.5%.
Côte d'Ivoire does not face any large principal commercial repayments
on its external debt over the next five years. Nor are its interest
service obligations in 2020 particularly large. The authorities
estimate that the DSSI will save approximately FCFA38 billion (about $66
million) in external debt service payments to official and bilateral creditors
for the remainder of the year, equivalent to 0.1%
of GDP. Meanwhile, Moody's estimates that the government's
external interest payments due to private creditors are around 1.1%
of GDP in 2020 as a whole.
Côte d'Ivoire has explicitly confirmed its intention not to
extend the DSSI to private sector debt. Nevertheless, the
G20's current debt relief terms as articulated in the term sheet published
on 15 April call for private sector participation on comparable terms.
The review period will allow Moody's to assess how the apparent
tension will be resolved between the government's desire not to extend
participation in the DSSI beyond debt service owed to official sector
creditors, and the G20's call for private sector creditors to participate.
It will assess whether Côte d'Ivoire's participation in that
initiative will indeed be implemented without private sector participation
and, if not, what lower rating would be consistent with expected
losses.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
Environmental considerations are material to Côte d'Ivoire's rating.
The country is significantly exposed to environmental risks. A
large part of the population relies on agriculture, and the country
is a leading exporter of agricultural products. As a result,
it is vulnerable to climate change, including draughts, deforestation,
and land degradation. A significant environmental shock could influence
some key credit metrics such as GDP growth, household income,
and agricultural export earnings. For example, a 5%
decline in cocoa production would reduce growth by 0.8%.
Social considerations are material to Côte d'Ivoire's rating.
Notwithstanding its high levels of growth over the last decade,
low wealth levels, and high, albeit improving, levels
of poverty remain. Growing income inequality could threaten political
stability in the future. Due to the government's efforts
to improve overall physical and social infrastructure, notable progress
has been made on access to basic services such as water and electricity.
Moody's regards the coronavirus outbreak as a social risk under
our ESG framework, given the substantial implications for public
health and safety. For Côte d'Ivoire, the shock
manifests mainly in deteriorating debt dynamics which is exacerbated by
slower growth.
Governance considerations are material to Côte d'Ivoire's rating.
The country's governance assessment, as measured by the Worldwide
Governance Indicators, was very low at the time of the civil conflict
in 2011. Since, it has seen a positive trend, with
all indicators on average reaching the 25th percentile in 2018 from below
the 10th percentile in 2011. Côte d'Ivoire defaulted in 2000
and again in 2011, which also highlights the weak (but improving)
institutional framework.
FACTORS THAT COULD RESULT IN CONFIRMATION OF THE CURRENT RATING OR DOWNGRADE
OF THE RATING
The rating would likely be confirmed at its current level should Moody's
conclude that Côte d'Ivoire's participation in DSSI
would be unlikely to entail default on private sector debt.
The rating would likely be downgraded should Moody's conclude that
participation in the G20 DSSI would probably entail default on private
sector debt. Under this scenario, Moody's would position
the rating at the level consistent with the losses expected to be incurred
by private creditors in the near future and over the medium term.
GDP per capita (PPP basis, US$): 4,457 (2019
Actual) (also known as Per Capita Income)
Real GDP growth (% change): 7.3% (2019 Actual)
(also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): -1.5%
(2019 Actual)
Gen. Gov. Financial Balance/GDP: -3%
(2019 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: -3% (2019 Actual) (also
known as External Balance)
External debt/GDP: 40.1% (2019 Actual)
Economic resiliency: ba3
Default history: At least one default event (on bonds and/or loans)
has been recorded since 1983.
On 11 June 2020, a rating committee was called to discuss the rating
of the Côte d'Ivoire, Government of. Other views raised
included: The issuer's economic fundamentals, including its
economic strength, have not materially changed. The issuer's
institutions and governance strength, have not materially changed.
The issuer's governance and/or management, have not materially changed.
The issuer's fiscal or financial strength, including its debt profile,
has not materially changed. The issuer's susceptibility to event
risks has not materially changed.
The principal methodology used in these ratings was Sovereign Ratings
Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1158631.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
The weighting of all rating factors is described in the methodology used
in this credit rating action, if applicable.
The local market analyst for this rating is Aurelien Mali, +971
(423) 795-37.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
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Elisa Parisi-Capone
Vice President - Senior Analyst
Sovereign Risk Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Marie Diron
MD-Sovereign/Sub Sovereign
Sovereign Risk Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
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