Negative outlook for Sub-Saharan Africa amid liquidity stress - Moody's 2017

Moody's, a leading financial services company, has recently issued a bleak outlook for sovereign creditworthiness in Sub-Saharan Africa for 2017. The negative forecast is primarily driven by liquidity stress, low growth, and political risk looming on the horizon for the region. In a recent interview with CNBC Africa, Lucy Villa, Vice President and Senior Analyst at Moody's, shed light on the factors contributing to this gloomy prognosis. Villa highlighted that out of the 19 countries rated in the region, seven countries have sovereign ratings with a negative outlook, with a particular focus on commodity-dependent economies like Angola, Gabon, Mozambique, Nigeria, and Zambia. One of the key challenges faced by commodity-dependent economies in Sub-Saharan Africa is liquidity pressure on the sovereign. With around 40% of exports from the region being commodity-driven, fluctuations in commodity prices directly impact the creditworthiness of these countries. Villa emphasized that the negative outlook signifies significant pressures on the sovereign creditworthiness, especially for economies reliant on commodity exports. Institutional capacity plays a crucial role in managing liquidity pressures and ensuring financial transparency in the region. Villa pointed out the importance of robust institutions in safeguarding economic stability and maintaining liquidity. Recent incidents in Mozambique, where vital information on debt was withheld by the central bank and the Minister of Finance, underscore the significance of transparency and good governance in managing financial risks. Despite the challenging economic environment, Moody's expects the region's fiscal positions to show signs of improvement in 2017. Villa explained that while the fiscal outlook is set to get better, it is essential to consider that 2016 was a challenging year for government finances in the region. The anticipated improvement in fiscal performance does not necessarily indicate a rosy picture, considering the starting point was a position of significant debt burden. Moody's also anticipates a stabilization in debt ratios after a period of rising debt levels in the region. Overall, the economic landscape in Sub-Saharan Africa remains complex, with ongoing challenges related to liquidity stress, low growth, and political uncertainties. Moody's negative outlook serves as a cautionary signal for policymakers and investors, highlighting the importance of structural reforms, institutional strengthening, and prudent fiscal management to navigate the tough economic terrain in the region.