In the framework of its regular review of short-term (ST) political risk classifications, Credendo has upgraded three countries (Congo DR, Timor Leste and Western Sahara) and downgraded three countries (El Salvador, Palau, Tuvalu).

Congo DR: upgrade from 7/7 to 6/7

Credendo has decided to upgrade the country to category 6/7. This is essentially the result of the long-awaited presidential election of last December which saw the controversial victory of Felix Tshisekedi. In the aftermath of the polls, no mass rioting in favour of defeated candidate Fayulu took place while the 16-nation South African Development Community (SADC) and the African Union eventually endorsed this official outcome. Hence, the risk for a full-blown civil war and widespread political violence has reduced and led Credendo to upgrade its political risk rating to 6/7 in February. In the coming months, we nevertheless expect a difficult ‘cohabitation’ between the new president and Kabila’s Common front of the Congo (FCC) coalition which keeps the legislative power and the prime minister’s post. The reaction of the population and international community to what seems to be a continuation of Kabila’s regime will also have to be monitored. Moreover, severe violent conflicts in a number of provinces (e.g. North/South Kivu, Kasai…) are still raging.

Meanwhile, although the modest short-term external debt and confined current account deficits ease liquidity pressures in the short term, Congo DR remains characterised by very narrow liquidity as foreign exchange reserves are especially low (less than one month of import cover in May 2018) and access to external funding is very limited. Besides, there is no fiscal space on the 2019 budget as the elections drained public finances. Looking ahead, it remains to be seen whether Kinshasa will be able to get financing from foreign loans or will have to turn towards the IMF.