Sub-Saharan Africa Sovereign Outlook Stable But Upward Debt Risk


Tuesday, December 03, 2019 / 08:16PM / by Fitch Ratings / Header Image Credit: iStock


The Outlook for the Sub-Saharan Africa (SSA) region is Stable, as significant adjustment has taken place in the region, Fitch Ratings says. Median government debt in the Sub-Saharan Africa region will decline in 2020 although upward pressures on debt will remain strong, given weak public financial management (PFM), urgent infrastructure needs and social pressures for improved public services.


Sovereigns in the SSA region largely absorbed the earlier commodity price shock, and will see median government debt decline in 2020 after a marginal reduction in 2019. However, weak PFM, persistent high-priority infrastructure needs and pressure for improved public services raise risks for debt trajectories. Political and social pressures are significant in the region, but many SSA sovereigns are benefiting from rapid growth. External pressures have eased, but low diversification means vulnerability to shocks is high.


Of the 19 sovereigns in the region, two carry a Positive Outlook and three a Negative Outlook. There are three sovereigns with a rating of 'CCC' and Fitch does not assign Outlooks for ratings of 'CCC+' or below. Benin's (B) Positive Outlook reflects continued fiscal consolidation and expected effect of a national accounts revision on key credit metrics. The Positive Outlook on Cote d'Ivoire (B+) is driven by strong growth prospects and progress on fiscal consolidation and reforms.


The Negative Outlook on South Africa (BB+) is due to the difficulty of stabilising debt/GDP. In Angola (B), the Negative Outlook is driven by worsening debt metrics, the continued fall in international reserves and the slow economic recovery. Fitch revised the Outlook on Ethiopia's 'B' rating to Negative due to prospects for continued political instability and potential meaningful economic spillovers.


Ratings are heavily concentrated at the lower end of the rating scale, with most ratings falling into the 'B' category. This reflects relatively weak structural features such as World Bank governance indicators and GDP per capita and, in many countries, relatively high debt.



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