Moody’s Rates Democratic Republic of Congo B3, Outlook Stable

Moody’s Investors Service assigned Democratic Republic of Congo, the world’s largest cobalt producer, a B3 sovereign issuer rating with a stable outlook.

The rating company, based in New York, considers investments with B ratings to be speculative and subject to high credit risk, according to an explanation of its rating system on the company website.

Congo’s B3 rating “reflects the fragility of the country’s economy and the very low per capita incomes relative to its rated peers,” Moody’s said in an e-mailed report. These weaknesses “are offset by the robust growth prospects driven by the significant foreign investment in the DRC’s mining sector and the expected rise in domestic consumption.”

Congo produced about half the world’s cobalt and was the eighth-largest producer of copper last year, according to the U.S. Geological Survey. The central African nation, sub-Saharan Africa’s largest by landmass, may ask for almost $12 billion in financing to build a 4,800 megawatt hydropower project that will provide energy to South Africa and its own mining industry.

About $3.4 billion in financing for the project will come from Congo, while private investors will provide the rest, according to a proposal by the government.

Increased infrastructure spending could improve Congo’s rating, Moody’s said, along with fiscal reforms, an increase in foreign-currency reserves, and strengthening of the young democracy’s institutions of government. Congo held its second election in 2011 after more than three decades of dictatorship.

Wartime past

Congo’s $18 billion economy, which grew at 7.2 percent in 2012, is still recovering from a series of wars that began in the 1990s. Conflict persists in the country’s east, and its expansion may diminish the country’s rating, Moody’s said, adding that intensification of the fighting was “unlikely.”

Congo yesterday agreed to peace talks with M23 rebels who have clashed with the national army and United Nations peacekeepers in eastern Congo since last year.

Moody’s expects Congo’s economic growth to average 8 percent “over the next few years,” as the mining industry expands and the government’s financial position improves, it said.

A drop in commodity prices may damage the rating, Moody’s said, along with a rapid depreciation of the Congolese franc or macroeconomic volatility caused by “a large deterioration of the government’s fiscal balance.”

The office of Congo’s central bank governor, Deogratias Mutombo, did not immediately respond to requests for comment by phone and text message.

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