Moody’s downgraded Cameroon’s credit rating to Caa1 from B2, citing delayed external debt payments in late 2022 and this year, including one to Deutsche Bank Spain that the ratings agency said it classed as an “incident of default”.

“Moody’s rating action reflects the emergence of cash management and liquidity challenges for the government,” the ratings agency said late on Thursday as it cut both the country’s foreign-currency and local-currency ratings.

“The missed payments came after a series of liquidity demands on the government, including higher fuel subsidies and increased off-budget spending on growing security needs.”

The government of Cameroon, which has both French and English-speaking regions, has been fighting Anglophone separatists in the north west since 2017, while Islamist Boko Haram militants carry out periodic attacks in its Far North region.

These conflicts “create significant off-budget spending pressures and weigh on the government’s available liquid resources,” Moody’s said, adding that there was “very weak cash and debt management capacity.”

Cameroon’s finance ministry did not immediately reply to requests for comment. Deutsche Bank declined to comment.

Cameroon’s only dollar-denominated international bond, a 10 year issue maturing in 2025, fell around 0.2 cents to 95.9 cents on the dollar on Friday, in line with broader market moves US133653AA31=TE. A 10-year euro-denominated international bond was fractionally lower too at 72.5 cents US133653AA31=TE.

Moody’s put a “stable outlook” on its new ratings.

Source: Reuters