Reuters logo
Fitch: Sub-Saharan Sovereign Debt Rises, Hampers Consolidation
September 30, 2016 / 8:16 AM / a year ago

Fitch: Sub-Saharan Sovereign Debt Rises, Hampers Consolidation

(The following statement was released by the rating agency) HONG KONG/LONDON, September 30 (Fitch) Sovereign debt levels and debt servicing costs have risen in sub-Saharan Africa (SSA) in recent years and will continue to do so in 2016 and 2017, Fitch Ratings says. The high share of concessional debt means that interest costs are not excessive for most countries in the region, but their increase makes fiscal consolidation more challenging. The median general government debt/GDP ratio for Fitch-rated SSA sovereigns climbed from 30.2% in 2011 to 49.7% in 2015. Our country-by-country fiscal projections imply that the median ratio will continue rising, to 51.4% in 2016 and 53.3% in 2017. Two key drivers are the commodities slump that has led to a sharp decline in fiscal revenues among exporters, and continuing reliance by some sovereigns on infrastructure investment to drive GDP growth. Ghana will use the proceeds of this month's USD750m Eurobond to refinance existing debt and fund capital investments. Central government capex will exceed 10% of GDP this year in Rwanda, Uganda, Lesotho, Mozambique and Ethiopia. The debt/GDP ratio is projected to increase for all Fitch-rated SSA sovereigns other than the Seychelles in 2012-2017. But the magnitude of the increase varies. Currency depreciation and falls in nominal GDP due to lower commodity prices have also increased debt ratios in many cases, including that of Mozambique, where the metical has fallen sharply. Mozambique shows the largest increase in debt/GDP in 2012-2017 (60 percentage points), and Nigeria the smallest (3.7 percentage points). Most SSA sovereigns started from relatively low levels of debt after restructurings and debt forgiveness in the 2000s. <iframe src="// d" title="Frontier Markets SSA Debt 3Q16" width="550" height="802" scrolling="no" frameborder="0"> Rising debt has pushed up median general government interest expenditure as a proportion of revenues, from 4.8% in 2011 to 9.1% this year, and we project close to 10% next year. SSA sovereigns benefit from access to concessional lending (the median share of concessional debt in total external debt for Fitch-rated SSA credits excluding South Africa in 2014 was 62%). Only in Ghana, Nigeria and Zambia do interest costs exceed 15% of revenues, mainly as a result of high interest rates on domestic debt. Rising debt servicing costs are an obstacle to fiscal consolidation among SSA sovereigns, and larger or unchanged deficits will lead to further increases in public debt, pushing debt ratios higher. SSA remains one of the fastest growing regions in the world. However, while debt-funded infrastructure investment will help remove constraints on long-term growth, its benefits may not fully materialise until governance and business environments improve. As such, its near-term impact on sovereign debt ratios will be negative. As well as rising debt, potential Fed tightening, dollar appreciation and volatile capital flows may lead to tighter financing conditions. Some capex budgets have been cut, but without revisions to overall expenditure frameworks for 2016 and 2017, debt ratios are unlikely to fall. Fiscal risks in SSA are one of the factors reflected in the balance of sovereign rating outlooks. Six of the 18 SSA countries rated by Fitch are currently on a Negative Outlook, and there are no Positive Outlooks. Persistent fiscal deficits and growing external deficits could result in negative rating actions, especially where debt levels are already high and liquidity buffers moderate. Contact: Jan Friederich Senior Director Sovereigns +852 2263 9910 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central Hong Kong Mark Brown Senior Analyst Fitch Wire +44 20 3530 1588 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email:; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at All opinions expressed are those of Fitch Ratings. Related Research 2016 Mid-Year Sovereign Review and Outlook here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below