PREVIEW
Despite current tighter financing conditions, Moody’s upgrades the region’s credit outlook to ‘stable’ amid reduced borrowing costs
Lower United States interest rates will mean cheaper borrowing for African states, ratings agency Moody’s believes. The ratings agency has revised its outlook on sub-Saharan Africa’s sovereign credit to ‘stable’ from ‘negative’ last year.
The US Federal Reserve cut its rate by a percentage point between September and December, with further cuts expected in 2025. This is despite new trade tariffs promised by President Donald Trump, which may have a drag on global economies.
Analysts at Moody’s Ratings expect the outlook for credit fundamentals for sub-Saharan African sovereigns to remain stable, up from negative last year, though financing conditions will still be tighter than pre-Covid.
Barring a handful of countries, most of Africa stayed away from the bond market in 2024 (Dispatches, 11/6/24, New President Faye passes the market test).
One of them, Kenya, issued a US$1.5 billion Eurobond in February 2024 to repay a maturing Eurobond and is expected to return to the market soon to repay a $900 million Eurobond tranche due in May. Securing a better interest rate than the 9.75% of last February will be a key early test (AC Vol 65 No 8, Austerity the price of debt workout dodge).
Being shut out of the financial markets has pushed a number of African countries deeper into debt distress contributing to debt restructuring and bailout deals for Ethiopia, Ghana and Zambia.
The latest, for Ethiopia, which agreed a $3.4bn programme with the IMF last July, remains on track. On 17 January, the IMF’s executive board approved the second review of Ethiopia’s programme, paving the way for a disbursement of about $250m.
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