Moody’s has upgraded Benin’s ratings outlook to positive while maintaining its long-term issuer ratings at B1. This change reflects significant improvements in the country’s economic resilience, public finance management, and governance. Despite regional geopolitical risks, the government’s proactive measures are expected to bolster fiscal strength and credit stability. Benin demonstrates robust growth potential with ongoing development in infrastructure and reduction in fiscal deficit.
Moody’s Ratings has confirmed the long-term issuer ratings of the Government of Benin, maintaining both local and foreign currency ratings at B1, while elevating the outlook from stable to positive. This upgrade arises from notable improvements in Benin’s economic and institutional frameworks, showcasing potential resilience against geopolitical risks, particularly those posed by the Sahel region.
The agency highlighted Benin’s commitment to fiscal discipline and public finance management, alongside a robust track record of economic resilience. Continued enhancements may soon justify a higher rating, given recent strong growth and rising income levels, despite ongoing external vulnerabilities.
Moreover, governance reforms have attracted investment, bolstering institutional robustness. The IMF program has facilitated fiscal consolidation, reducing the deficit to approximately 3% of GDP by 2024. Although revenue remains comparatively low, proactive debt management and improved fiscal structures have mitigated liquidity risks.
The agency asserted that the maintained B1 ratings reflect a delicate balance of Benin’s growth prospects against existing regional geopolitical tensions and its still-developing economic indicators. The ceilings for local currency and foreign currency remain unchanged at Baa3 and Ba1 respectively, indicating limited, albeit existing, transfer risks between currencies.
Moody’s noted that the positive outlook is significantly driven by Benin’s economic resilience and improvement in governance due to international support from entities like the World Bank. This positions Benin more favorably to withstand economic shocks stemming from its geographic vulnerabilities and improve its credit quality.
The country’s real GDP growth is impressive, averaging 6.6% from 2021 to 2024, despite external disruptions. The implementation of Government Action Programmes (PAGs) has contributed to economic decoupling from regional instability, resulting in increased GDP per capita and diversification within the economy.
Infrastructural developments, such as the Glo-Djigbé industrial zone, are expected to generate significant employment while enhancing local product processing. These initiatives may substantially uplift overall GDP as the petroleum sector is poised to further diversify Benin’s economy post-2025.
Benin’s fiscal health is improving, with projections indicating a decline in the deficit and debt burden, bolstered by effective public finance management strategies. An estimated fiscal deficit of 3% of GDP for 2024 aligns with the WAEMU requirements, showcasing prudent financial oversight and a favorable debt structure.
The nation is achieving reliable access to funding amid fiscal challenges, successfully securing loans from domestic and international financial institutions. This approach stabilizes the economy, extends the maturity of government debt, and minimizes exposure to currency fluctuations.
Prospects for expanding the revenue base remain critical, as ongoing initiatives are necessary to solidify fiscal strength. Predictions suggest government revenue may reach 17% of GDP by 2028, reflecting gradual but positive revenue growth.
The affirmation of ratings at B1 indicates optimism regarding Benin’s growth trajectory and fiscal stability, although it is tempered by prevalent geopolitical risks and the necessity for ongoing structural reforms. The government’s commitment to investments in infrastructure, underlined by international backing, fosters expectations for continued economic advancement. Moodys also emphasized the need for vigilance due to escalating terrorism threats in the region.
In conclusion, Moody’s upgrade of Benin’s ratings outlook to positive reflects the country’s evolving economic resilience, effective public finance management, and positive governance enhancements. Despite regional geopolitical risks, the government’s continuous commitment to structural reforms and infrastructure investments positions Benin for potential credit rating improvements in the near future. The outlook is cautiously optimistic, underscoring the delicate balancing act required to navigate both growth opportunities and risks.
Original Source: dmarketforces.com
