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Togo Gets S and P’s ‘B and B’ Rating: To Join The Eurobond Bandwagon?

Global Market	2959 VIEWS
Global Market
2959 VIEWS

Sunday, June 09, 2019 / 05:00PM / United Capital Research / Header Image Credit:Wikipedia

Recently, reports emerged that S&P -one of the top three global credit rating agencies- had assigned its ‘B/B’ long- and short-term foreign and local currency ratings to Togo with a stable outlook. The rating agency cited its expectation for economic growth in the country to remain resilient over the coming years on the back of key infrastructure and economic reforms. Also, it noted that Togo’s membership in the West African Economic and Monetary Union (WAEMU) provides the country with substantial buffer against external pressure and a sturdy policy anchor. Accordingly, S&P became the first global credit rating agency to assign a rating on Togo.

This rating places Togo at par with fellow African countries like Cameroon, Ghana, Nigeria, Egypt, and Rwanda, but below S/Africa, the only Economy under our coverage with a BB rating by S&P. We note that save for Morocco, with a BBB- credit rating, no other economy in Africa has an investment grade credit rating from S&P. Also, Zambia was downgraded 8 steps into junk to Caa2 by Moody’s in May 2019, as debt crisis worsens driving Eurobond yield to c. 22%.

In our view, we believe the issuance of the credit rating on Togo is indicative of the French-speaking W/African Nation’s willingness to join the 21 other African countries that have issued Eurobonds in recent years. A move that contradicts both the World Bank and IMF recommendations for African countries to cut down on their external borrowings while building fiscal discipline.

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