The downgrade reflects a further weakening in the country's fiscal strength despite policy statements of plans to rein in the fiscal deficit.
Moody's is concerned about
Meanwhile, the negative outlook reflects risks remaining slanted to the downside.
"Implementation of the government's fiscal consolidation plans will invariably prove challenging in a low growth environment, particularly as the government targets reducing the large but politically challenging public sector wage bill. Moreover, very large gross borrowing requirements, given the sovereign's continued reliance on short-term funding, point to material liquidity risk," read the statement from Moody's.
Concurrently,
Moody's said it expects a sharp widening of
Meanwhile, debt affordability has weakened, with the interest bill set to rise to 15.5% of revenues in next fiscal year (up from 5% five years ago).
"The increase in debt is driven by the primary deficit and interest costs: both representing a drag on debt dynamics over the coming five years, while growth will provide only a moderate offset starting from 2021. Interest costs are set to peak at around 6% of GDP and the foreign currency share at around 1% over the forecast period, leaving debt affordability at a moderate level while ever the interest rate remains lower than nominal growth," said Moody's.
The ratings agency also expects real GDP to contract by 6.9% in 2020, and only to grow by 2.4% in 2021 as agricultural production gradually returns after a prolonged and devastating drought, while the mining sector and the travel and tourism industry remain depressed.
The weak growth outlook continues to pressure revenue generation, compounded by the forthcoming decline in
Moody's expects
Copyright New Era. Distributed by AllAfrica Global Media (allAfrica.com)., source