· Moody’s, one of the three leading global credit rating Agencies has announced results of debt downgrade for four African countries.
· Senegal which was regarded as one of the rising stars was downgraded to ‘negative’.
Moody’s, one of the three leading global credit rating Agencies has announced results of debt downgrade for four African countries. Senegal which was regarded as one of the rising stars was downgraded to ‘negative’. Ethiopia, Cameron and Cote d Ivoire were the other countries that were reviewed. All of them managed to continue to hold the “stable” status. The reviews are justified in the context of the disruption unleashed by the Pandemic. Many of the countries had to seek debt relief to support their health resources to fight the Pandemic. Observers have remarked that African countries were reluctant to jump at a debt service relief package approved by the World Bank, IMF, G20, AFDB and Paris Club creditors to free up about $ 20 billion to support Africa’s health systems. The countries are aware that the terms of the debt markets are unfavorable and they face the risk of penalty by creditors, prospective investors and rating agencies if they seek a debt moratorium.
According to World Bank data, Africa’s debt burden rose by 150%to over $583 billion in 2018 from $236 a decade earlier. The economic impact of the growing spread of COVID 19 has become a matter of concern. The continent saw the number of confirmed COVID 19 cases soar to 1 million last week. It may be noted that given the low number of tests being done, how far is the spread and how long it will take for the continent to get access to vaccines is a matter of grave concern. Moody’s downgrade notes clearly reflected its assessment that the country’s participation in the G20 Debt service suspension Initiative (DSSI) raised the risk that private-sector creditors would suffer losses. The average African Finance Minister does not want to risk his country’s reputation as they got access to private credits markets over the last decade. Countries seeking debt suspension tend to be regarded as high risk and irresponsible borrowers.
Political commentators point out that while there has been a lot of hue and cry about Africa’s debt to China, the real challenge could come from the capital centres of London and New York.
