S&P Global Ratings held Democratic Republic of Congo’s long-term foreign-currency debt rating at CCC+ and lowered its outlook to stable from positive amid the fallout from the coronavirus pandemic.
Emergency foreign assistance should help balance out the worst effects of the virus on Congo’s economy, which could rebound if copper and cobalt demand and production increase as expected, the ratings agency said on its website.
“DRC’s economic environment has significantly deteriorated, due largely to Covid-19, which will take a heavy toll on the country’s economic and budgetary performances in 2020,” S&P said. “Despite relatively solid prospects once Covid-19 impacts abate, thanks to higher mining export potential and recently contained domestic tensions, we still consider that DRC’s ability to meet its financial commitments over the medium-to-long term depends on favorable business, financial, and economic conditions.”
Economic growth is set to contract 2.4% this year with inflation rising above 15%, according to the country’s central bank. The Congolese franc has fallen more than 18% against the dollar since January, according to data compiled by Bloomberg.
Congo is the world’s largest source of cobalt and Africa’s biggest copper producer. Increased demand for the minerals coupled with the planned opening of Ivanhoe Mines Ltd.’s massive Kamoa-Kakula copper project next year should buoy the economy, S&P said. The central african nation relies on mining for 95% of its export earnings.
However, ongoing political instability is a risk for the country, the ratings company said. Congo is governed by an uneasy coalition between President Felix Tshisekedi and supporters of former President Joseph Kabila, who controls parliament and almost all governorships and provincial assemblies.
“It is still unclear whether the new president has the ability to durably calm domestic tensions,” S&P said. “Should tensions within the coalition escalate, we expect making and enforcing policy decisions will be challenging.”
(By Michael Kavanagh)