Downgrading Africa’s development

CAIRO: In 2020, the COVID-19 pandemic triggered Africa’s first recession in a quarter-century and, with it, an avalanche of sovereign credit-rating downgrades across the region. Eighteen of the 32 African countries rated by at least one of the “big three” agencies – Fitch Ratings, Moody’s, and S&P Global Ratings – suffered downgrades that risk exacerbating the immediate crisis. Moreover, the ratings agencies’ actions could undermine the longer-term structural transformations needed to reduce these economies’ unhealthy commodity dependence.

Fifty-six percent of rated African countries were downgraded last year – significantly above the global average of 31.8% and the averages in other regions (45% in the Americas, 28% in Asia, and nine percent in Europe). The share of affected African sovereigns is even higher (62.5%) if we include the two (Kenya and Mauritius) downgraded in the first half of 2021. The glut of downgrades has been accompanied by a torrent of negative reviews of African countries’ ratings outlooks. Between them, the three agencies revised downward the outlook of 17 sovereigns – four from positive to stable and 13 from stable to negative.