Ethiopia pleased with first credit rating

Ethiopia pleased with first credit rating

Sofian AhmedAddis Ababa, 14 May 2014 (WIC) The Ministry of Finance and Economic Development (MoFED) expressed its pleasure with first sovereign credit rating by three leading global rating agencies.

Last week, Fitch and Standard & Poor’s (S&P) assigned Ethiopia a long-term foreign and local currency Issuer Default Debt Rating (IDR) of ‘B’ with an outlook of stable. On Monday, Moody’s followed up giving the country a higher rating of a “B1” (B+).

The ratings will open the door for the Ethiopian government to diversify its sources of finance and highlights the country’s overall transformation aided by a double-digit economic growth over the past decade.

“We are proud and very pleased with the first ratings and it testifies to the tangible transformation of the country,” Sofian Ahmed, Minister of MoFED, said today at a press conference.

“This shows that our economic model is bearing results and we are on the right track of growth and renaissance of the country,” Sofian added.

The rating paves the way for the government to issue international bonds and also attract more flow of foreign direct investment into Ethiopia.

The rating agencies evaluated various aspects of the country’s economy for the past six months and their ratings will be reviewed annually. The rating agencies highlighted a record of strong economic growth and reduction of poverty with bright prospect.

The agencies hailed the country in reducing poverty, expansion of infrastructure, internal stability coupled with a role in bringing about regional peace as well as a healthy external debt, the minister said.

Sofian said the rating paints a positive outlook of the economy of Ethiopia, a country associated with poverty and hunger for long, for potential investors.

“We believe the report provides investors who wish to invest in Ethiopia with factual and accurate information about the country,” Sofian said.

Sofian highlighted the importance of continued public investment on infrastructure development such as roads, railways and hydro-power projects which is driving the economy as well as contributing for the growth of the private sector.

However, the minister said more needs to be done to improve the efficiency of government agencies, build institutional capacities and improve quality of infrastructures.

The government expects the economy to continue to grow fast and one of the rating agencies – Fitch has predicted growth of around nine percent this year, lower than the government’s target.

Following its ratings, Fitch has published a full rating report and a special report entitled ‘Ethiopia: Rapid Progress, Strong Potential’ analyzing the country’s strengths and weakness compared with its rating category, based on the analysis of the four key elements in Fitch’s sovereign rating criteria: structural features, macroeconomic performance, public finances and external finances.

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By Richard Lough

ADDIS ABABA, May 14 (Reuters) – Ethiopia has not yet decided if it will follow other African countries that have tapped international markets with Eurobonds, the finance minister said on Wednesday after his country secured a sovereign credit rating.

Ethiopia, which has previously said it was considering issuing a Eurobond, was awarded a ‘B’ rating by Fitch on Friday with a stable outlook. Kenya, which plans a Eurobond worth up to $2 billion, has received a ‘B+’ rating by Fitch.

“This (rating) result offers an opportunity for Ethiopia if it decides, to enter international capital markets. We have not yet decided,” Finance Minister Sufian Ahmed told a press conference in Addis Ababa.

Foreign investors are closely watching Ethiopia, attracted by a decade of high growth and a market of about 90 million people. But the authorities have been reluctant to open up the economy, which is now dominated by the state.

Sufian said growth was still on track to reach about 11 percent in the 2013/2014 financial year, making Ethiopia one of Africa’s fastest growing economies.

Several African nations, including the tiny nation of Rwanda last year, have successfully issued Eurobonds.

Since then, the price for such issues has climbed since the U.S. central bank scaled back its bond buying programme that had prompted investors to seek higher-yields in developing markets.

Ethiopia has mostly relied on domestic resources and Chinese loans to finance big infrastructure projects across the country. It has not made clear when it might tap international markets.

“It depends on the global financial situation,” Sufian said when describing the timing of any Eurobond or other international borrowing. He said most financing for domestic projects was already secured.

The International Monetary Fund has said Ethiopia risks crimping growth if it does not give private business more space.

Sufian rejected the notion that the government was crowding out business and said the government’s role was central to keeping the economy growing at a pace.

“Without government investment in infrastructure, we cannot sustain this growth,” he said. “We hope this (investment) will crowd in the private sector in the long term.”

Source: Reuters



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