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Moody's downgrades Gabon, changes outlook to stable

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Moody's downgrades Gabon, changes outlook to stable

Moody's on June 8 lowered the issuer and senior unsecured debt ratings of Gabon to Caa1 from B3 and changed its outlook to stable from negative, citing the government's heightened liquidity pressures and continued institutional weaknesses.

The rating agency said Gabon's challenges are highlighted by continued government arrears to creditors and suppliers, including bilateral and multilateral lenders, despite the government's assurances to settle its dues to external lenders by 2017-end under an IMF program.

The arrears, which represented approximately 2% of Gabon's GDP at March-end according to Moody's estimates, risk delaying critical financial support from the official sector, potentially further raising liquidity pressures.

The stable outlook is based on Moody's assessment that the Gabonese government's fiscal and liquidity challenges would be likely counterbalanced by continued financial aid from the IMF. The agency believes that the government will carry out some fiscal consolidation measures, but their actual impact will be limited in 2018 and continuing arrears will likely persist.