Moody’s cuts Ethiopia

Moody's Investors Service said it downgraded Ethiopia's foreign-currency long-term issuer and senior unsecured ratings to Caa3 from Caa2 and affirmed its local-currency long-term issuer rating at Caa2. The agency also changed the issuer's outlook to stable from negative.

“The main driver behind the downgrade of Ethiopia's FC rating is the increasingly high likelihood of default on FC-denominated private-sector debt because of strained external liquidity, for which the government has sought relief under the G20 common framework for debt treatment.

“The downgrade is however limited to one notch, to Caa3, to reflect Moody's expectation that the losses for private-sector creditors will likely be commensurate with an indicative range of 20%-35%, which is lower than the historical average of losses for sovereigns of about 50 because the government primarily seeks liquidity relief,” the agency said in a press release.

As for the outlook, the Tigray war truce means the country’s debt relief may proceed quickly with limited losses to creditors, Moody’s said.

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