JOHANNESBURG - Moody's Investor Services on Tuesday maintained a negative outlook on Cameroon's sovereign credit rating following the announced election results.
This as Cameroon's long-serving ruler of 36 years, Paul Biya, 85, on Monday won an emphatic election victory with 71 percent of the vote cementing his place as one of Africa's longest-standing rulers.
Prior to the election, Moody's had said that domestic political risk is the main driver of event risk in Cameroon given mounting succession risks ahead of the October 7 polls.
Political tensions intensified after claims from opposition candidates that the election was rigged and violence broke out, forcing tens of thousands to flee in the lead up to the vote. But the Constitutional Council last week rejected all 18 petitions claiming fraud.
Elisa Parisi-Capone, vice president and sovereign analyst for Cameroon at Moody's, said a weak institutional environment, particularly in the areas of control of corruption and public financial management, were some of Cameroon's credit challenges.
On the fiscal side, Parisi-Capone said public and external debt had increased significantly on the back of the mostly externally financed public investment programme and exacerbated by the country.
"Our outlook on Cameron’s B2 sovereign rating remains negative to reflect a rising likelihood of the country's fiscal strength continuing to weaken and the ongoing conflict in its Anglophone regions. As well as the humanitarian costs, the conflict is increasingly having an economic cost especially in the cocoa and agro-processing industries which experienced significant production and export declines recently," Parisi-Capone said.
"A rating downgrade could occur if pressure on the government’s fiscal strength and liquidity risk increased or if political unrest intensified with negative spillovers on economic activity."
Cameroon's economic growth decelerated to 3.5 percent in 2017 from 4.5 percent in 2016 due to a steep decline in oil production and despite the gradual rebound in international oil prices.
The country's balance of payments risks are contained by the country's membership of Central African Economic and Monetary Community (CEMAC) where the pegged exchange rate to the euro benefits from a convertibility guarantee from the French Treasury. Regional pooled foreign reserves stabilised at $4.6 billion in March 2018 after reaching an all-time low of $3.3 billion (R46.9bn) in June 2017.
Moody's said the three-year Extended Credit Facility (ECF) programme agreed between the IMF and Cameroon and other CEMAC countries in July 2017 aims to make structural and fiscal adjustments to improve the region's external position.
African News Agency (ANA)