Moody’s Upgrades Benin Ratings Outlook to Positive

Moody’s Ratings has upgraded Benin’s ratings outlook to positive while affirming its ratings at B1. This adjustment reflects improvements in the nation’s economic resilience, governance, and public finance management. The positive outlook suggests potential for higher ratings if trends continue, despite geopolitical risks and challenges in revenue generation.

Moody’s Ratings has affirmed Benin’s local and foreign currency long-term issuer ratings at B1, shifting the outlook from stable to positive. This change is indicative of steady enhancements in Benin’s economic, institutional, and fiscal parameters, which bolsters the nation’s resilience against geopolitical threats in the Sahel region. The ratings reflect Benin’s robust public finance management and strong economic growth, alongside improvements in governance and transparency, which enhance investment appeal.

The report notes that if current trends persist, Benin might achieve a higher rating in the future. The economy has shown noted growth, diversification, and rising income levels, albeit from low levels. Moody’s has also highlighted the government’s effective fiscal policies under the IMF program, leading to a projected fiscal deficit of approximately 3% of GDP by 2024. Additionally, proactive debt management has helped mitigate liquidity risks for the government.

The stability of the local currency and foreign currency country ceilings remains unchanged at Baa3 and Ba1, respectively. The one-notch divergence between the ceilings indicates limited transfer and convertibility risks due to the guaranteed peg between the CFA franc and the euro. Moody’s recognizes that these improvements in governance provide Benin with greater capacity to withstand economic shocks, though regional instability remains a concern.

Further economic resilience is observed, with real GDP growth averaging 6.6% from 2021 to 2024. The Glo-Djigbé industrial zone, established in 2021, is pivotal in diversifying the economy and is expected to create substantial employment opportunities, projected to generate 300,000 jobs by 2030 and increase GDP by up to $7 billion. The external fiscal situation has also strengthened, leading to a positively balanced overall payments position.

In terms of public finance, there has been a commendable improvement, aligning fiscal deficit goals with WAEMU thresholds through both revenue increases and expenditure controls. Benin’s debt burden is projected to decrease, with a notable fall in the interest payments-to-revenue ratio while maintaining fiscal safety amid potential external liabilities. Access to funding for government needs remains reliable, as the government successfully acquires affordable loans even during challenging market conditions.

The affirmation of Benin’s ratings underscores expectations of continued economic growth and moderate debt levels, supported by structural reforms and public investment in infrastructure. However, low incomes and a developing institutional framework pose ongoing challenges. The potential threats of terrorism and geopolitical tensions remain significant risks, though improved management capabilities enhance resilience against such scenarios.

In conclusion, Moody’s upgrade of Benin’s ratings outlook to positive highlights the nation’s increasing economic resilience, improvement in governance, and effective fiscal management. With ongoing structural reforms and projected growth, Benin appears positioned for further advancement. However, it must navigate geopolitical risks and strengthen its revenue-generating mechanisms to sustain this positive trajectory.

Original Source: dmarketforces.com