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STATEMENT BY THE AFRICAN PEER REVIEW MECHANISM ON THE DOWNGRADE OF ETHIOPIA BY FITCH

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APRM CEO Prof. @eddymaloka congratulates the APRM team under the coordination of Ms. @TawfikHamouda for putting up a successful three-days Africa High-Level forum of #SouthSouth and Triangular Cooperation in Kampala, Uganda.

Kudos to everyone involved 🙌🏾 @NPA_UG , @GovUganda

Congratulations @APRMorg for organizing this successful international Event in the Pearl of Africa, Thank you for your great efforts in promoting partnerships and coordination between countries of the global south in line with #SustainableDevelopment and Agenda 2063. 🌍📍UGANDA🇺🇬

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On the occasion of the 2nd Africa High-Level forum, CEO Prof. @eddymaloka was honored with an appreciation award for his leadership and commitment in making the APRM mandate on promoting good governance a success on the continent.

Congratulations Professor Maloka. 🙌🏾

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STATEMENT BY THE AFRICAN PEER REVIEW MECHANISM ON THE DOWNGRADE OF ETHIOPIA BY FITCH

PUBLISHED BY: APRMPOSTED: 11-02-2021

11 February 2021 The African Peer Review Mechanism (APRM), a specialized entity of the African Union (AU), had a mandate to supports African countries in the area of credit rating agencies. As part of this mandate, the APRM undertakes routine reviews of rating outcomes assigned by international credit ratings agencies on African countries. The APRM has noted the downgrade of the Republic of Ethiopia’s long-term foreign currency sovereign credit rating by Fitch on the 09th of February 2021, 2-notches from B to CCC. Moody’s and S&P Global rating still has the country’s long-term credit rating on B2 and B, respectively. The newly assigned rating for Ethiopia means the country is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for it to meet its financial commitments on the obligation. The APRM raises the following observations;

  1. The key driver of Ethiopia’s rating downgrade is the announcement by the government that it will be utilizing the G20’s Common Framework for Debt Treatments under the Debt Service Suspension Initiative (DSSI).
  2. The assessment that this G20 debt support mechanism is still an untested mechanism and explicitly raises the risk of a default event is speculative and unobjective. From the precedence of the DSSI program, it has been clear that the G20’s debt relief programs will not be imposed on private creditors whose choice to reject the debt relief request will remain open.
  3. Ethiopia only has one outstanding Eurobond and has wide number options to service both the Eurobond and other commercial debt; its risk of falling into debt distress is significantly minimal. The bulk of the country’s public external debt is official multilateral and bilateral debt that the country may most likely restructure rather than default.

Based on these factors, the APRM views the downgrade of the Government of Ethiopia’s long-term foreign currency sovereign credit rating by Fitch to CCC as an incorrect reflection of the country’s creditworthiness. The rating downgrade, in fact, counters the efforts by the G20 to assist the Government of Ethiopia and other developing countries to address the impact of the Covid-19 pandemic as it immediately leads to increase in the cost of servicing existing debt. The APRM will therefore provide technical and operational support to Ethiopia’s credit rating liaison team to engage Fitch on its newly assigned credit rating with aim of attaining a rating upgrade in future review.

END.

 


For inquiries please contact: Liziwe Masilela (Head of Communications APRM)

[email protected]

 

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