Moody's on July 28 lowered the long-term local- and foreign-currency issuer ratings of the Republic of the Congo to Caa2 from B3 and maintained its negative outlook.

At the same time, the rating agency lowered the government's local- and foreign-currency long-term bond and deposit ceilings to B2 from Ba3.

The government missed a $21 million coupon payment on its Eurobonds due 2029, despite having transferred the funds on June 26 to the U.S.-based trustee. Commissions Import-Export SA, a contractor who alleges that the government owes it €1 billion, stopped the funds from being transferred to bondholders through two restraining notices.

A 30-day grace period expires at the end of July. The agency expects that the government will default on its Eurobonds.

The next semiannual coupon payment is due in December.

Moody's said a default will exacerbate already acute liquidity pressures, potentially leading to sizable losses for private-sector creditors in the coming years.