What You Need to Know
S&P Global Ratings has issued a warning that the risks to African sovereign credit ratings are likely to worsen amid ongoing conflicts in the Middle East. Countries like Mozambique, Egypt, and Rwanda are identified as the most exposed due to rising fuel and fertilizer costs, which could lead to increased inflation and fiscal pressures. The agency’s outlook suggests that Africa’s borrowing costs is
Africa-Press – Mozambique. S&P Global Ratings warned on Thursday that the risks to African sovereign credit scores were likely to worsen the longer the Middle East war drags on.
The ratings agency said that higher fuel and fertilizer import costs would increase inflation and fiscal strains for countries, “potentially leading to rating pressure”.
Egypt, Mozambique and Rwanda are among the “most exposed” the agency said, although Egypt’s deep domestic capital markets and Rwanda’s high levels of concessional debt provide some offset.
Less exposed are net-oil exporters Nigeria, Angola and Congo-Brazzaville as well as Morocco, due to stronger foreign-currency reserves.
S&P’s “base case” assumed that the conflict will peak and that the Strait of Hormuz will gradually reopen but related disruptions will likely persist for months. A resumption of hostilities and a more prolonged conflict would present a greater threat to many African sovereigns.
The ratings agency said it expected Africa’s borrowing costs to increase due to war’s impacts and as a result of global risk aversion.
S&P in recent weeks kept Egypt’s credit rating on a “stable” outlook and affirmed ratings for Morocco, Ghana and Mozambique.
The economic landscape in Africa has been significantly impacted by global events, particularly conflicts that disrupt trade and increase costs. The ongoing war in the Middle East has led to higher prices for essential imports like fuel and fertilizers, exacerbating inflationary pressures across the continent. Countries such as Mozambique and Egypt, which rely heavily on these imports, face heightened risks to their sovereign credit ratings as assessed by agencies like S&P Global Ratings. Historical trends indicate that prolonged conflicts can lead to increased borrowing costs and fiscal strains, affecting economic stability and growth prospects for these nations.
