Moody’s: Togo’s participation in DSSI poses risks for private sector

The Togolese government's decision to take part in the G20 Debt Service Suspension Initiative (DSSI) has raised concerns about potential risks for the private sector, according to Moody's. The initiative, which suspends payments to bilateral Paris Club creditors from the 1st of May until the end of 2020, aims to provide short-term liquidity relief for Togo. Lucie Villa, Vice President and Senior Credit Officer at Moody's, explained that while the initiative offers some relief, it also presents risks for private creditors. Togo's participation in the initiative could potentially result in modest liquidity relief for the government, but it may carry more significant risks for private sector creditors. Moody's report and projections indicate that the credit risk for private creditors is a key consideration, with the possibility of default and losses for creditors. Despite the modest relief offered to Togo, the risks for private creditors remain a concern. The G20's call for private sector participation raises questions about the implications for Togo and its external private creditors. The uncertainty surrounding the terms of the moratorium and the lack of agreement between participating sovereigns and external private creditors could impact Togo's debt management strategy going forward. Moody's assessment suggests that Togo's debt management efforts, such as the recent debt restructuring exercise, are crucial in navigating the challenges posed by the DSSI. The government's proactive measures to improve debt sustainability, such as the debt profiling exercise, have already resulted in significant savings. The debt profiling exercise, completed last week, has reportedly saved over half a percent of GDP, with projections indicating further savings of 1.6% GDP over the long term. Togo's focus on enhancing its debt management strategy will be critical in mitigating the risks associated with the DSSI and ensuring financial stability in the face of economic challenges. As the government continues to navigate the complexities of debt sustainability and external creditor relations, Moody's emphasizes the importance of a comprehensive and proactive approach to debt management to safeguard the interests of all stakeholders.