By Jennifer Zabasajja and Moses Mozart Dzawu, Bloomberg
More African countries are likely to regain or achieve investment-grade credit ratings by next year as reforms begin to deliver results and economic growth accelerates, African Development Bank President Sidi Ould Tah said.
Several African sovereigns have already been upgraded in recent months. S&P Global Ratings raised Morocco to investment grade last year, increased South Africa by one level in November and lifted Nigeria’s rating in May. Ghana, Zambia, Ivory Coast and Kenya have also benefited from positive rating action linked to fiscal, debt and economic reforms.
“We’re quite confident that the continent will continue to grow very strong and that African countries will be better rated in the coming years,” Ould Tah said in an interview. “We’ve seen Morocco receive investment grade during the last few months and we expect other countries by next year to get toward that.”
The outlook reflects improving fiscal positions and reforms implemented across countries on the continent, even as the conflict in the Middle East threatens to slow economic growth and raise costs for energy-importing nations. Better credit ratings can help countries borrow at lower rates and fund development projects.
The premium investors demand over US Treasuries to hold African debt has eased to 304 basis points from a peak of 405 basis point in early April as investors reassessed the impact of the war on African economies.
The AfDB projects the continent’s gross domestic product expansion will accelerate to 4.4% next year — if the conflict in the Middle East doesn’t drag on — after slowing to 4.2% this year.
The war in Iran has benefited oil producers such as Nigeria, Angola and Gabon, while exerting pressure on the fiscal positions of net energy importers such as South Africa, Kenya, Ghana and Senegal.
Ould Tah said the bank is ready to support countries facing budget constraints and high debt burdens due to the impact of the Iran crisis, including increasing credit lines to them.
“The board of directors of the bank will examine in the coming days how the bank can increase the volume of resources it will provide to its member countries in this specific situation,” he said.
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