Ethiopia receives credit ratings needed for Eurobond issue

Reuters
May 10, 2014

NAIROBI (Reuters) – Ethiopia received its first credit ratings on Friday, paving the way for a possible debut sovereign debt issue which would give investors another route into Africa’s second-most populous country.

Fitch assigned the Horn of Africa nation a long-term foreign and local currency Issuer Default Debt Rating (IDR) of ‘B’ with a stable outlook, putting the country on a par with its Kenyan and Ugandan ratings.

Standard & Poor’s (S&P) assigned Ethiopia ‘B/B’ foreign and local currency ratings and also said the outlook was stable, reflecting the view that strong growth will be maintained over the next year and the current account deficit will not rise.

Ethiopian Prime Minister Hailemariam Desalegn told Reuters in October that it planned a debut Eurobond once it had secured a credit rating, though he gave no time frame.[ID:nL6N0I033U]

“Ethiopia’s growth over the medium-term can be sustained by large, untapped resources, including large hydro-electric potential,” Fitch said in a statement, forecasting growth of 9 percent this year and 8 percent in 2015.

“However, the private sector’s weakness, reflecting the country’s fairly recent transition to a market economy, and its inadequate access to domestic credit, could limit growth potential over the medium-term as public investment slows,” Fitch added.

Ethiopia’s ratings were constrained by a weak level of development, with an income per capital well below ‘B’ medians, Fitch said.

Ethiopia is now sub-Saharan Africa’s fifth-biggest economy, which until recently the state has kept a firm grip on. Key sectors including banking, telecoms and retail still remain tightly regulated and closed off to foreigners.