Saturday, July 2, 2022
    - Advertisement -
    - Advertisement -
    BusinessGov’t downplays downgraded investment outlook

    Gov’t downplays downgraded investment outlook


    Moody’s global relative rating of Ethiopia has been downgraded as the public revenue streams dry up. The government has downplayed the recent credit rating siting the global pandemic as the cause for government’s coffers drying up, The Reporter has learnt. The downgraded rating has been moved from the previous B2 rating status to B1 by Moody’s, with a negative outlook.

    When asked by The Reporter how the government received the outcome as Moody’s, S& P and Fiches downgraded Ethiopia’s credit rating status; Eyob Tekalign (PhD), State Minister of Finance said, the downgraded outcomes are not exclusive to Ethiopia’s status and the revised ratings have undertaken the debt servicing capacities of countries.

    Prime Minister Abiy Ahmed (PhD), who has championed Africa’s call for debt cancellations and emergency support, has seen some results as the likes of G-20 consider freezing debt servicing, for at least nine months. That was on basis of backing poor countries’ priorities to spend on emergency requirements.

    “We are not that much worried about by the rating outcomes. Once the emergency settles, the rating status will be restored. But we have had talks with the agencies and we didn’t take it as a big deal,” Eyob said.

    Fanuel Teklegiorgis, an independent strategy and investment consultant, however, argued that the ratings suggest that the government is facing some serious liquidity risks and weak credit management. “And, above all, the ratings indicate that the economic strength has materially shrunk,” Fanuel adding, “If we consider Moody’s rating as a medical doctor’s examination results, it shows that there are several factors that can cause the pain as well as symptoms that could be displayed over a period. My views on the cause of the pain are simply pointed towards the poor macroeconomic management practices, incompetent economic policies that could have better assisted to combat uncertain times.”

    More adverse implications of the ratings, according to Fanuel, include government’s anticipated inability to provide basic services such as health care, education, security and the likes, once the government fails to pay public debts.  

    On 2020, Moody’s outlooks in measuring the government’s ability to pay public debts according to Fanuel, has implications of defaulting. However, that is as unlikely as Eyob underscored Ethiopia’s outstanding single Eurobond worth USD one billion does not necessarily entail that degree of skepticism for defaults.

    Since September 2019, Standard & Poor’s credit rating for Ethiopia stood at B with a negative outlook. Moody’s credit rating for Ethiopia was last set at B2 and the outlook for May remains under review with possibilities of a negative outlook. Fitch’s credit rating for Ethiopia was last reported at B with a negative outlook.

    Literature suggests that, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Ethiopia thus having a big impact on the country’s borrowing costs.

    - Advertisement -



    More like this

    Ethiopia quarantines two individuals suspected of Monkeypox

    Two individuals with complexity of symptoms have been quarantined...

    Dangote to expand cement operations, rejects offer to invest in fertilizer market

    Dangote Cement is preparing to undertake an expansion project...

    Authority discovers distributors diverting fuel to Tigray, Sudan

    Fuel supply to Amhara region drops by 77 trucks...

    UN claims access granted to investigate atrocities in Ethiopia

    Commission to investigate latest mass killings in western Oromia UN...