Moody’s Sees Africa Rating Downgrades as Government Debt Worsens

Moody’s Investors Service said rising government debt in sub-Saharan African nations could prompt credit-rating downgrades in the coming year.

Ghana and South Africa, which Moody’s has on a negative watch, “reflect this downside risk to credit quality in the region,” Matt Robinson, manager of Africa sovereign ratings at Moody’s, said at a conference today in Kenya’s capital, Nairobi.

South Africa’s credit rating was lowered by Standard & Poor’s last month to BBB-, one level above junk and two steps below Moody’s assessment of Baa1. A five-month mining strike that caused the economy to contract in the first quarter may slow growth this year, making it difficult for the government to meet its budget-deficit targets.

“Deterioration in fiscal position, deterioration in some of the indicators of institutional strength, these are the key credit issues we are watching that will inform any rating going forward,” Robinson said in an interview.

Moody’s cut Ghana’s rating on June 27 to B2, the fifth-highest non-investment grade, while retaining its negative outlook because of concerns that debt levels will deteriorate ahead of elections and if gas production doesn’t begin as scheduled.

“If the expected increase in gas production does not come on stream, then a lot of those forecasts that are based on a reduction in gas imports will have a significant impact on the current-account deficit, on the fiscal deficit,” Robinson said.

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