2023-09-08 09:02:24
Gabon finds itself at a critical crossroads, where each political event might influence its perception on the international economic scene. At least that’s what emerges from the Fitch Ratings report dated September 5.
The rating agency warned Libreville by placing its “B-” rating on “negative watch”, citing a risk of payment default. According to her, the institutional disruptions caused by the August 30 coup might weaken the country’s solvency by harming “the operational capacity of the institutions responsible for managing its cash and debt”, while limiting its access to capital markets. The risk would be increased tenfold in the event that regional and/or international entities were to establish economic sanctions as was recently the case in Mali and Niger, with ECOWAS and UEMOA. “Gabon’s deposits are partly held at the regional central bank (BEAC) and are therefore vulnerable to sanctions,” recalls the agency.
Meet your financial commitments
To date, the Central African Economic and Monetary Community (Cemac) and the Economic Community of Central African States (ECCAS) are leaning in favor of a diplomatic approach. This is why ECCAS, on September 5, suspended Gabon’s participation and commissioned Central African President Faustin-Archange Touadéra to begin a dialogue in Libreville with the Committee for the Transition and Restoration of Institutions (CTRI), aiming at a rapid restoration of constitutional order.
For its part, Fitch Ratings believes that Gabon remains well positioned to meet its short-term financial commitments, with euro obligations remaining “manageable” at least until 2025, “despite the accumulation of arrears to other external creditors in 2022 and 2023, and difficulties in obtaining multilateral financing. Gabonese bonds from the Central African Stock Exchange (BVMAC), with an outstanding amount of 378 billion CFA francs, remain stable. And the country is on track to respect the penultimate due date of its “EOG 6.25% Net 2019-2024” loan, while having already fulfilled its obligations with the Bank of Central African States (BEAC) at the end of August.
Indeed, despite the coup d’état, Libreville issued bonds and bonds on August 30. However, less subscription is expected, while another operation on the money market is being prepared.
Structural weaknesses
Before the coup, the “B-” rating noted in an August 5 report already highlighted Gabon’s weaknesses in terms of financial management and the interruption of reforms, including those of the IMF program. “The resumption of the IMF program – whose deadline is set for June 2024 – is now unlikely”, we can read in the latest note from Fitch Ratings.
Thus, the rating agency anticipates budgetary financing needs representing on average 7.2% of GDP for 2024-2025, and suggests that the government consider a reduction in spending “if external financing does not materialize or if revenues turned out to be disappointing.
In 2024, the agency forecasts a significant increase in production, boosted by the opening of new wells and the rise in oil prices. This dynamic is expected to support stable economic growth of 2.8% for the period 2024-2025, propelled by export-oriented industries and important projects d’infrastructure.
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