Gabon Faces Default Risk Amid IMF Program Uncertainty

Fitch Ratings has identified a significant risk of default for Gabon, citing persistent uncertainty about whether the oil-producing nation will formally engage with the International Monetary Fund (IMF). Jose Mantero of Fitch noted that while Gabon's authorities indicated interest in an IMF program in January, a formal request has yet to be submitted. An IMF delegation is scheduled to visit Gabon starting Wednesday, a visit that could clarify the situation.

Gabon's financial markets are showing distress. The country's sovereign risk premium has surged, nearing a threshold that signals distress. Its dollar bonds have been the worst performers across emerging markets in February, reflecting investor concerns. Fitch had previously downgraded Gabon's long-term foreign-currency rating to CCC- in December, attributing it to a substantial debt burden and limited domestic financing options.

The situation is further complicated by a decline in demand for Gabon's debt from the regional market, which restricts its funding avenues. Fitch suggests that an IMF program, by providing a clear strategy to reduce deficits, could unlock new financing sources and help Gabon regain access to external markets. Until such a program is secured, pressures on Gabon's creditworthiness are expected to remain substantial.