Upgrade of DRC’S sovereign credit rating—One step forward, after one step back
DRC has better growth and fiscal prospects than regional peers… Following a slowdown in real GDP growth induced by the COVID-19 pandemic, the Democratic…
By Zuzana Brixiova Schwidrowski, Aloysius Uche Ordu
DRC has better growth and fiscal prospects than regional peers…
Following a slowdown in real GDP growth induced by the COVID-19 pandemic, the Democratic Republic of Congo (DRC) posted a robust rebound (6.2 percent) in 2021. According to recent IMF forecasts, economic growth remained above 6 percent in 2022, with GDP growth projected to reach 6.3 percent in 2023. DRC’s growth will thus remain above the average for sub-Saharan Africa (SSA), driven by the extractives sector and improved utilization of other natural resources. The country’s overall public and publicly-guaranteed debt is also relatively low—at 24 percent of debt-to-GDP as at the end of 2022, it is less than half of the SSA average with only moderate risk of debt distress. High political and security risks, however, continue to dampen economic prospects and underscore the importance of governance reforms.
… But like most African sovereigns, DRC is caught in a low ratings trap
Furthermore, in January 2023, Moody’s downgraded Nigeria to Caa1 from B3, compounding the negative trend in the region’s credit risk assessments. As such, the general outlook for SSA’s sovereign ratings in 2023 remains precarious, reflecting rising fiscal, liquidity, and social risks amplified by the adverse effects of the Russia-Ukraine war and the tightening of global financial markets.
Figure 1. Moody’s changes in rating levels in Africa, 2020 – 2022
Source:Authors’ calculations based on the Moody’s Investors Service data. Note:Excludes North African countries (Egypt, Morocco, Tunisia).
Since credit ratings are path-dependent, abrupt downgrades in Africa’s ratings can have long-term implications regarding limits to rating improvements. Over the past decade, the speed of rating adjustments in Africa (and frontier markets in general) has been asymmetric—with unexpected, procyclical, and multiple downgrades but slow and gradual upward climbs.
More specifically, while upgrades occur only after the sovereign has been on a positive outlook for some time, downgrades do not necessarily follow negative outlooks. For example, it took Senegal six years to be upgraded one notch, from B1 to Ba3. In contrast, the Republic of Congo’s (Congo Brazzaville) three-notch downgrade in 2015/2016 occurred within less than one year: from Ba3 with stable outlook in October 2015, to B3 by August 2016 with further review for downgrade, putting into question the country’s ratings stability and long-term horizon. Zambia’s downgrades in April 2016 and May 2019 occurred without signaling, from stable outlooks.
Overinflated risk ratings reflect credit rating agencies’ limited recognition of Africa’s unique idiosyncrasies, such as: its green mineral endowments, the lack of relevant data (e.g., on contingent liabilities or public sector debt), and heightened risk perceptions reinforced by negative narratives of mainstream media. These factors, which play a disproportionate role in unsolicited ratings, can put African governments into the “low ratings, high borrowing cost” trap described by Hippolyte Fofack.
In similar fashion to DRC, views on credit risks associated with long-term, fixed-income obligations of other sovereigns in Central and West Africa are also bleak. They are on average rated between B2 and B3 (i.e., speculative and high credit risk). Barring recent upgrades for Benin, Cote d’Ivoire, and Senegal, the average sovereign rating for Central and West Africa fell during the post-COVID period by more than one notch in most countries. Moreover, in the majority of the cases, the change entailed multiple downgrades—to very high/nearing default credit risk (Table 1).
Table 1. Rating levels and changes for sovereigns in Central and West Africa
Source: Authors, based on the Moody’s Investors Service data.
Sovereign ratings constrain ratings of other entities
Sovereign ratings have a systemic effect on countries’ domestic capital markets because these ratings typically serve as a ceiling for credit ratings of most other rated entities such as municipalities, banks, or corporations. Indeed, sovereign rating downgrades have significant adverse effects on ratings of private companies and financial market institutions, even if there is no fundamental change in the creditworthiness of these entities. The fall in bond prices and downgrade of nine banks in Nigeria, following the sovereign’s downgrade, illustrate this point.
Given DRC’s relatively low and volatile domestic savings rates, access to foreign financing at a reasonable cost is critical for the country’s social and economic development.
DRC still faces a steep path to investment grade
As a result of the latest rating assessments by Moody’s (and the S&P which in January 2022 upgraded DRC’s credit rating from CCC+ to B-, an identical rating to Moody’s B3), the country is bound to benefit from strengthened economic and fiscal prospects, as well as an improved external position, i.e., increased foreign exchange reserves and stabilized exchange rate.
While these factors could change suddenly should another major global or regional shock arrive, the drivers constraining upward movement of DRC’s ratings, are structural in nature and hence more long-term. For example, they include very low GDP per capita; weak (albeit improving) institutions; large infrastructure gaps; risk of social unrest and political instability; as well as continued conflict in eastern DRC. Against these hurdles, it appears that the DRC faces a steep and long climb to an investment grade rating or even a better non-investment grade rating; that is, at least a Ba rating as has been the case for Senegal and Cote d’Ivoire.
However, the broader and more pertinent question (which pertains to other SSA sovereigns), remains: To what extent has the DRC been set back by the negative initial assessments? The question is especially relevant since some of the country’s main strengths are not directly included in the rating methodologies, for example, its sizeable demographic dividend arising from its large, youthful, and rapidly growing population; a peaceful democratic transition (the first ever in the country’s history); increased competitiveness, as well as expectations of more diversified trade and economic growth following its admission as a member of the East African Community.
… but Eurobond issuance backed by natural resources and regional MDBs could ease the way
What can therefore be done to improve Africa’s, and in this case DRC’s, credit ratings? Especially over the short-term as many of the frequent recommendations (adjusting methodologies, regulating credit rating agencies, establishing independent data collection agency) would take time.
To reset the perception of DRC’s low creditworthiness in the near future, there is a strong case for the government to issue a pilot sovereign bond on international markets that would receive a good rating and establish a new benchmark. The enhanced rating could be achieved via securitization of the DRC’s existing or future assets (minerals, hydropower potential, arable land, and the second-largest rainforest in the world). However, the process would need to be transparent and linked to growth-enhancing projects to avoid pitfalls associated with resource-backed loans. In the past, these loans often went to countries with weak governance, suffered from the lack of competitive markets, and contributed to capital outflows.
DRC could also strive to have its Eurobond issuance backed by guarantee from a multilateral development bank (MDB). In this case, support from borrower-led MDBs is more likely because on the continent, these MDBs are governed by African countries with similar goals and views on their role in development. Conversely, lower credit ratings of such entities would limit the upgrades of any Eurobonds they may guarantee, and thus reduce effectiveness.
In the longer term, countries such as DRC that share common currency (CFA franc) with the Central African Economic and Monetary Union (CEMAC) or West African Economic and Monetary Union (WAEMU) members, may wish to consider issuing joint regional Eurobonds. The EU has already embarked on such issuance, and African countries may start exploring this option and monitoring EU experiences with this endeavor. To succeed, such a move would require significant political will, including a regional debt management strategy, enhanced communication, agreements on future debt issuance and the use of the proceeds, as well as backing by joint guarantees. This option would also support regional integration of financial markets and hence implementation of the African Continental Free Trade Area (AfCFTA).
RIVERSIDE, Calif. — Physicist Barry C. Barish, a distinguished professor of physics and astronomy at UC Riverside, was awarded the National Medal of Science by President Joe Biden at a ceremony held at the White House today. Established in 1959 by the U.S. Congress, the National Medal of Science is the highest recognition the nation can bestow on scientists and engineers.
Credit: Stan Lim, UC Riverside.
RIVERSIDE, Calif. — Physicist Barry C. Barish, a distinguished professor of physics and astronomy at UC Riverside, was awarded the National Medal of Science by President Joe Biden at a ceremony held at the White House today. Established in 1959 by the U.S. Congress, the National Medal of Science is the highest recognition the nation can bestow on scientists and engineers.
The President’s National Medal of Science is given to individuals “deserving of special recognition by reason of their outstanding contributions in biology, computer sciences, education sciences, engineering, geosciences, mathematical and physical sciences, and social, behavioral, and economic sciences, in service to the Nation.” It is administered by National Science Foundation.
Barish was recognized for “exemplary service to science, including groundbreaking research on sub-atomic particles. His leadership of the Laser Interferometer Gravitational-Wave Observatory led to the first detection of gravitational waves from merging black holes, confirming a key part of Einstein’s Theory of Relativity. He has broadened our understanding of the universe and our Nation’s sense of wonder and discovery.”
“UCR congratulates Prof. Barish on receiving the National Medal of Science,” said UCR Chancellor Kim A. Wilcox. “The distinguished names of previous winners make this recognition very exceptional. Prof. Barish is a strong inspiration for our students, researchers, and faculty. UCR continues to benefit from his extraordinary achievements.”
Barish won the 2017 Nobel Prize in physics for the discovery of gravitational waves. He joined the UCR faculty in 2018. He earned his bachelor’s degree in physics in 1957 and his doctorate in experimental particle physics in 1962, both from from UC Berkeley. He joined Caltech as a postdoc in 1963, became a professor in 1966, and was appointed Linde Professor of Physics in 1991. He led the Laser Interferometer Gravitational-wave Observatory, or LIGO, effort from its inception through the final design stages, and in subsequent discoveries. In 1997, he created the LIGO Scientific Collaboration, which enables more than 1,000 collaborators worldwide to participate in LIGO.
Barish has served on many committees, including co-chairing the subpanel of the High Energy Physics Advisory Panel that developed a long-range plan for U.S. high-energy physics in 2001. He chaired the Commission of Particles and Fields and the U.S. Liaison Committee to the International Union of Pure and Applied Physics.
He is the recipient of the Fudan-Zhongzhi Science Award (China), Princess of Asturias Prize for Science and Technology (Spain), Giuseppe and Vanna Cocconi Prize from the European Physical Society, the Enrico Fermi Prize from the Italian Physical Society, and the Klopsteg Award from the American Association of Physics Teachers. He is a member of the National Academy of Sciences, which awarded him the Henry Draper Medal. From 2003 to 2010, he served as a presidential appointee to the National Science Board.
He is an elected member of the American Academy of Arts and Sciences and a fellow of both the American Association for the Advancement of Science and of the American Physical Society, where he also served as president. He has received honorary doctorates from the University of Bologna, University of Florida, University of Glasgow, and Universitat de València in Spain. He has been inducted as honorary academician into the Royal Academy of European Doctors, based in Spain. He was elected a foreign member of the Royal Society in 2019. Last year, he won the Copernicus Prize, bestowed by the government of Poland. Earlier this year, he was elected a corresponding member of the Royal Academy of Sciences and Arts of Barcelona.
The University of California, Riverside is a doctoral research university, a living laboratory for groundbreaking exploration of issues critical to Inland Southern California, the state and communities around the world. Reflecting California’s diverse culture, UCR’s enrollment is more than 26,000 students. The campus opened a medical school in 2013 and has reached the heart of the Coachella Valley by way of the UCR Palm Desert Center. The campus has an annual impact of more than $2.7 billion on the U.S. economy. To learn more, visit www.ucr.edu.
Public support for extending the 14-day rule on human embryo research indicated by foundational dialogue project
The findings of a foundational UK public dialogue on human embryo research are published today, Wednesday 25th October 2023, as part of the Wellcome-funded…
The findings of a foundational UK public dialogue on human embryo research are published today, Wednesday 25th October 2023, as part of the Wellcome-funded Human Developmental Biology Initiative (HDBI). The HDBI is an ambitious scientific endeavour to advance our understanding of human development. The dialogue project, which was co-funded by UKRI Sciencewise programme, engaged a diverse group of the public to consider how early human embryo research can be used to its fullest, the 14-day rule and the fast-paced field of stem cell-based embryo models.
Credit: Dr Matteo Molè (Babraham Institute)
The findings of a foundational UK public dialogue on human embryo research are published today, Wednesday 25th October 2023, as part of the Wellcome-funded Human Developmental Biology Initiative (HDBI). The HDBI is an ambitious scientific endeavour to advance our understanding of human development. The dialogue project, which was co-funded by UKRI Sciencewise programme, engaged a diverse group of the public to consider how early human embryo research can be used to its fullest, the 14-day rule and the fast-paced field of stem cell-based embryo models.
Headline findings include:
Appetite for review of the 14-day rule: Participants recognised that extending the 14-day rule could open up ways to achieve benefits in fertility and health, with participant support for reviewing this, including national discussion.
Confidence in regulation: There was a high level of confidence in how human embryo research is regulated, despite a low level of awareness of the regulators and statutes themselves. This included strong desire to see robust regulation governing any changes to the 14-day rule and further regulation for the use of stem cell-based embryo models.
Support for improved fertility and health outcomes: The strongest hopes for future human embryo research were where new knowledge would deliver improvements in understanding miscarriage, preventing health conditions such as spina bifida and raising the success rates of IVF procedures.
Concerns about genetically engineering humans: The public expressed concerns on the application of developments in this field to genetically alter or engineer humans.
The dialogue engaged a group of 70 people broadly reflective of the UK population in over 15 hours of activities including a series of online and face-to-face workshops with scientists, ethicists, philosophers, policy makers and people with relevant lived experience (such as embryo donors from IVF procedures).
Dr Peter Rugg-Gunn, scientific lead for the HDBI and senior group leader at the Babraham Institute, said: “Recent scientific advances bring incredible new opportunities to study and understand the earliest stages of human development. To ensure this research remains aligned with society’s values and expectations, we must listen and respond to public desires and concerns. This public dialogue is an important first step and as a scientist I am reassured by the findings but there is still a long way to go to fully understand this complex issue.”
The report is exceedingly timely, following notable scientific advances in human developmental biology presented at conferences and in leading scientific journals in recent months. As well as generating excitement in scientific fields and with the public, announcement of these breakthroughs also prompted some concerns and criticisms, with the view that these findings raised significant ethical issues. The dialogue provides insight into public considerations following deliberation on early human embryo research. The hope is that it will act as a foundational reference point that others in the sectors can build upon, such as in any future review of the law on embryo research.
Professor Robin Lovell-Badge, co-chair of the HDBI Oversight group, senior group leader and head of the Laboratory of Stem Cell Biology and Developmental Genetics at the Francis Crick Institute, said: “We have learnt a lot about human development before 14 days, but there are areas of investigation that could change how we understand development, and associated diseases, that lie beyond our current window of knowledge. Despite low awareness of current laws, members of the public quickly recognised many of the critical issues researchers are keenly aware of when it comes to growing embryos beyond the current limit. This dialogue also reinforced the fact that the public are in support of research that will yield better health outcomes, and in this case, increase the success of IVF procedures.
Other countries will be looking to the UK to see how we deal with the 14-day rule; we are not there yet with any mandate to make a change, but this does give a strong pointer. The next step will be to delve deeper into some of the topics raised through this dialogue as they apply to specific areas of research, as well as feeding into policy changes.”
The 14-day rule and the regulation of stem cell-based models
When considering the regulation of research involving human embryos, the dialogue explored participant’s views on the 14-day rule. Introduced in 1990, the 14-day rule is a limit enforced by statute in the UK. It applies to early human embryos that are donated by consent to research and embryos that are created for research from donated sperm and eggs. It limits the amount of time early human embryos can be developed in a laboratory for scientific study to 14 days after fertilisation. Due to technical advances, it is now possible to grow embryos in the lab past 14 days, but researchers are not allowed to by the law. If the law changed, it would open up this ‘black box’ of development with researchers able to investigate this crucial time in development from 14-28 days after fertilisation.
Professor Bobbie Farsides, co-chair of the HDBI Oversight group and Professor of Clinical and Biomedical Ethics at the Brighton and Sussex Medical School, said: “It has been a fascinating experience to support HDBI in the undertaking of this exercise. I commend the participants for the care and mutual respect they have shown throughout. Their engagement and commitment to a subject few of them had previously considered allowed for a wide range of views to be expressed and considered. I hope the scientists involved will be encouraged by the high level of interest in their work, and will want to keep the public conversation going around these important subjects.”
The dialogue included participant discussion on what a change to the 14-day rule might look like, and identified points that should be considered, such as defining what the benefits of extending the rule would be and potential mis-alignment with human embryo research regulations in other countries.
Participants acknowledged the astonishing possibilities of stem cell-based embryo models. The majority of participants would like to see these models further regulated. Work in establishing potential governance mechanisms is already underway. In recognition of the need for additional guidance and regulation in this area, the Cambridge Reproduction initiative launched a project in March 2023 to develop a governance framework for research using stem cell-based embryo models and to promote responsible, transparent and accountable research.
Future steps
A key outcome from the public dialogue is the identification of areas for further exploration, with participants proposing how future national conversations might be shaped. It is hoped that the project acts as a reference base for both widening engagement with the subject and also prompting deeper exploration of areas of concern.
Dr Michael Norman, HDBI Public Dialogue coordinator and Public Engagement Manager at the Babraham Institute, said: “This dialogue shows that people want the public to work closely with scientists and the government to shape both future embryo research legislation and scientific research direction. It is crucial that others in the sector build on these high quality, two-way engagement methodologies that allow for a genuine exchange of views and information to ensure that the public’s desires and concerns are listened to and respected. Transparency and openness around science is vital for public trust and through this we, as a society, can shape UK research in way that enriches the outcomes for all.”
Public Participant (Broad public group, south) said: “I do think that an extension of this public dialogue, and educating a wider society has a benefit in itself. This is really complex and sensitive and the wider you talk about it before decisions are made, the better.”
Public support for extending the 14-day rule on human embryo research indicated by foundational dialogue project
The findings of a foundational UK public dialogue on human embryo research are published today, Wednesday 25th October 2023, as part of the Wellcome-funded…
The findings of a foundational UK public dialogue on human embryo research are published today, Wednesday 25th October 2023, as part of the Wellcome-funded Human Developmental Biology Initiative (HDBI). The HDBI is an ambitious scientific endeavour to advance our understanding of human development. The dialogue project, which was co-funded by UKRI Sciencewise programme, engaged a diverse group of the public to consider how early human embryo research can be used to its fullest, the 14-day rule and the fast-paced field of stem cell-based embryo models.
Credit: Dr Matteo Molè (Babraham Institute)
The findings of a foundational UK public dialogue on human embryo research are published today, Wednesday 25th October 2023, as part of the Wellcome-funded Human Developmental Biology Initiative (HDBI). The HDBI is an ambitious scientific endeavour to advance our understanding of human development. The dialogue project, which was co-funded by UKRI Sciencewise programme, engaged a diverse group of the public to consider how early human embryo research can be used to its fullest, the 14-day rule and the fast-paced field of stem cell-based embryo models.
Headline findings include:
Appetite for review of the 14-day rule: Participants recognised that extending the 14-day rule could open up ways to achieve benefits in fertility and health, with participant support for reviewing this, including national discussion.
Confidence in regulation: There was a high level of confidence in how human embryo research is regulated, despite a low level of awareness of the regulators and statutes themselves. This included strong desire to see robust regulation governing any changes to the 14-day rule and further regulation for the use of stem cell-based embryo models.
Support for improved fertility and health outcomes: The strongest hopes for future human embryo research were where new knowledge would deliver improvements in understanding miscarriage, preventing health conditions such as spina bifida and raising the success rates of IVF procedures.
Concerns about genetically engineering humans: The public expressed concerns on the application of developments in this field to genetically alter or engineer humans.
The dialogue engaged a group of 70 people broadly reflective of the UK population in over 15 hours of activities including a series of online and face-to-face workshops with scientists, ethicists, philosophers, policy makers and people with relevant lived experience (such as embryo donors from IVF procedures).
Dr Peter Rugg-Gunn, scientific lead for the HDBI and senior group leader at the Babraham Institute, said: “Recent scientific advances bring incredible new opportunities to study and understand the earliest stages of human development. To ensure this research remains aligned with society’s values and expectations, we must listen and respond to public desires and concerns. This public dialogue is an important first step and as a scientist I am reassured by the findings but there is still a long way to go to fully understand this complex issue.”
The report is exceedingly timely, following notable scientific advances in human developmental biology presented at conferences and in leading scientific journals in recent months. As well as generating excitement in scientific fields and with the public, announcement of these breakthroughs also prompted some concerns and criticisms, with the view that these findings raised significant ethical issues. The dialogue provides insight into public considerations following deliberation on early human embryo research. The hope is that it will act as a foundational reference point that others in the sectors can build upon, such as in any future review of the law on embryo research.
Professor Robin Lovell-Badge, co-chair of the HDBI Oversight group, senior group leader and head of the Laboratory of Stem Cell Biology and Developmental Genetics at the Francis Crick Institute, said: “We have learnt a lot about human development before 14 days, but there are areas of investigation that could change how we understand development, and associated diseases, that lie beyond our current window of knowledge. Despite low awareness of current laws, members of the public quickly recognised many of the critical issues researchers are keenly aware of when it comes to growing embryos beyond the current limit. This dialogue also reinforced the fact that the public are in support of research that will yield better health outcomes, and in this case, increase the success of IVF procedures.
Other countries will be looking to the UK to see how we deal with the 14-day rule; we are not there yet with any mandate to make a change, but this does give a strong pointer. The next step will be to delve deeper into some of the topics raised through this dialogue as they apply to specific areas of research, as well as feeding into policy changes.”
The 14-day rule and the regulation of stem cell-based models
When considering the regulation of research involving human embryos, the dialogue explored participant’s views on the 14-day rule. Introduced in 1990, the 14-day rule is a limit enforced by statute in the UK. It applies to early human embryos that are donated by consent to research and embryos that are created for research from donated sperm and eggs. It limits the amount of time early human embryos can be developed in a laboratory for scientific study to 14 days after fertilisation. Due to technical advances, it is now possible to grow embryos in the lab past 14 days, but researchers are not allowed to by the law. If the law changed, it would open up this ‘black box’ of development with researchers able to investigate this crucial time in development from 14-28 days after fertilisation.
Professor Bobbie Farsides, co-chair of the HDBI Oversight group and Professor of Clinical and Biomedical Ethics at the Brighton and Sussex Medical School, said: “It has been a fascinating experience to support HDBI in the undertaking of this exercise. I commend the participants for the care and mutual respect they have shown throughout. Their engagement and commitment to a subject few of them had previously considered allowed for a wide range of views to be expressed and considered. I hope the scientists involved will be encouraged by the high level of interest in their work, and will want to keep the public conversation going around these important subjects.”
The dialogue included participant discussion on what a change to the 14-day rule might look like, and identified points that should be considered, such as defining what the benefits of extending the rule would be and potential mis-alignment with human embryo research regulations in other countries.
Participants acknowledged the astonishing possibilities of stem cell-based embryo models. The majority of participants would like to see these models further regulated. Work in establishing potential governance mechanisms is already underway. In recognition of the need for additional guidance and regulation in this area, the Cambridge Reproduction initiative launched a project in March 2023 to develop a governance framework for research using stem cell-based embryo models and to promote responsible, transparent and accountable research.
Future steps
A key outcome from the public dialogue is the identification of areas for further exploration, with participants proposing how future national conversations might be shaped. It is hoped that the project acts as a reference base for both widening engagement with the subject and also prompting deeper exploration of areas of concern.
Dr Michael Norman, HDBI Public Dialogue coordinator and Public Engagement Manager at the Babraham Institute, said: “This dialogue shows that people want the public to work closely with scientists and the government to shape both future embryo research legislation and scientific research direction. It is crucial that others in the sector build on these high quality, two-way engagement methodologies that allow for a genuine exchange of views and information to ensure that the public’s desires and concerns are listened to and respected. Transparency and openness around science is vital for public trust and through this we, as a society, can shape UK research in way that enriches the outcomes for all.”
Public Participant (Broad public group, south) said: “I do think that an extension of this public dialogue, and educating a wider society has a benefit in itself. This is really complex and sensitive and the wider you talk about it before decisions are made, the better.”
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