Fitch affirms Ethiopia at ‘B’ with Stable Outlook
The rating agency, Fitch has affirmed Ethiopia’s Long-Term Foreign- and Local Currency Issuer Default Ratings (IDRs) at ‘B’ with a Stable Outlook.
Fitch also announced June 8, 2017 that the issue rating on Ethiopia’s senior unsecured foreign-currency bonds have been affirmed ‘B’, the country ceiling has been affirmed ‘B’ and the Short-Term Foreign- and Local Currency IDRs also at ‘B’.
According to Fitch, Ethiopia’s rating at ‘B’ is weighed down by low development indicators, significant external imbalances and rapidly increasing state-owned enterprises debt.
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These weaknesses are offset by low and mostly concessional general government debt and a track record of robust economic growth,” it said.
Ethiopia, despite social and political troubles lately has been experiencing remarkable economic growth for some time now. It is one of the 10 countries in Africa estimated to grow above 5 per cent in 2017. The growth rate for Ethiopia is expected to be 7.5 per cent, the second highest after Ivory Coast, according to the Brookings Institute.
Fitch indicates, however that Ethiopia’s structural features remain a major credit weakness, with human and economic indicators ranking among the lowest of its sovereigns.
“At $1,500, Ethiopia’s purchasing power parity gross national income ie well below the ‘B’ media of $7,720. The long-standing challenges raised by low governance indicators are underscored by the bout of social unrest experienced in 2016, particularly in the populous regions of Oromia and Amhara,” it said.
While the political situation has returned to normal in 2017, Fitch believes that the prolongation of the State of Emergency that was proclaimed in October 2016 for the first time in two decades illustrates the persistence of significant underlying tensions, despite relaxation of some of its provisions.
In 2016 Ethiopia attracted more foreign direct investment (FDI) than ever before, according to the World Investment Report released by the United Nations Conference on Trade and Development (UNCTAD) June 7, 2017.
FDI flows to Ethiopia increased by 46 per cent to $3.2 billion in 2016, propelled by investments in infrastructure and manufacturing.
By Emmanuel K. Dogbevi
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