Afreximbank and Fitch terminate their credit rating partnership
Fitch Ratings has terminated its credit rating agreement with the African Export-Import Bank (Afreximbank), claiming the institution does not comprehend its role.
The multilateral financial institution with its headquarters in Cairo made the announcement this week after reviewing its partnership with the New York-based agency Fitch Ratings.
According to the Bank, it is firmly of the opinion that Fitch’s credit rating exercise no longer accurately reflects the Bank’s Establishment Agreement, mission, and mandate.
In a press release, the bank stated, “Afreximbank’s business profile remains robust, underpinned by strong shareholder relationships and the legal protections embedded in its Establishment Agreement, signed and ratified by its member states.”
Months after the ratings agency lowered, the action Tensions in the discussion about Western institutions’ control over perceived risks in Africa that can result in high capital costs are highlighted by Afreximbank’s elevation above junk grade.
Afreximbank was under increased investigation following Fitch’s rating because of its “weak risk management policies” and “high solvency risks.”
Due to increased risks from the restructuring of its sovereign debts, Fitch downgraded Afreximbank from a BBB stable outlook to a BBB- with a negative outlook in June of last year.
Concerns regarding non-performing sovereign loans in Zambia and Ghana, which totaled $45 million and $750 million, respectively, were raised by Fitch. Additionally, the bank is exposed to South Sudan and Malawi.
Afreximbank had contended that, in keeping with standard MDB treatment, it ought to be granted preferred creditor status, which would reduce the possibility of damages.
Government officials and other creditors, however, attempted to incorporate the loans into broader restructuring initiatives. However, officials argued that those loans should be considered commercial facilities because their rates were greater than those of regular concessional financing.
Restructuring the loans would increase the risks of Afreximbank’s approach, according to Fitch, which also stated that the bank’s non-performing loan ratio should be 7.1% instead of 2.3%.
However, in response, Afreximbank stated that Fitch’s conclusion was “based on the mistaken belief” that its founding treaty, which affirms its preferred credit status, could be “violated by the bank without consequences.”
