The outlook for sovereign creditworthiness in North Africa and Levant is “negative” for this year, Moody’s Investor Service said in a report.

High and volatile prices for fuel and food will pose difficult policy trade-offs, given much of the region’s dependence of these products, the ratings agency noted. 

“The impact on consumers h credit quality will vary based on relative exposure, fiscal starting points and funding structure, and the quality and effectiveness of institutions and policy making,” said Christian Fang, Vice President-Senior Analyst at Moody’s.

He said that fiscal and liquidity risks will be the key drivers of credit quality for the weakest sovereigns, adding that long-standing social strains feature prominently and will shape policy priorities.’

Moreover, higher food and energy prices due Russia-Ukraine conflict will continue to pose policy dilemmas for most countries in North Africa and Levant.

Exposure to fiscal and liquidity risks stemming from weak debt affordability and low foreign exchange reserves adequacy will determine credit quality.

Compared to other regions, long-standing social strains, which have the potential to spill over into political discourse and developments, will be a significant hurdle for governments in North Africa and Levant, Fang stated.

(Editing by Seban Scaria seban.scaria@lseg.com)