ETHIOPIA: Moody’s Affirms Ethiopia’s B1 Rating

Monday February 26 2018

On 23^rd February 2018, Moody’s Investors Service affirmed the Government of Ethiopia’s long-term issuer rating and senior unsecured rating at B1. The outlook remains stable.

The affirmation recognizes Ethiopia’s credit strengths including very strong growth potential supported by rising foreign direct investment (FDI), large infrastructure investment and broadening access to credit along with Moody’s expectation that the government balance sheet will remain solid with low fiscal deficits and debt levels, supported by low financing costs. These strengths are balanced by credit constraints including contingent liability and external risks related to rapid debt-financed investment, external vulnerability risks related to a structural shortage of US dollars for the private sector, and persistent elevated political risk amid severe social tensions.

The stable outlook reflects balanced risks at the B1 rating level. On the upside, investment could enhance the economy’s capacity to produce foreign-currency revenues more rapidly than Moody’s currently expects, which would bolster Ethiopia’s capacity to carry external debt. On the downside, conversely, the pace of growth in external debt may continue to exceed generation of US dollar revenues for longer than currently expected, raising external vulnerability risks. Moreover, political tensions could have a more negative and long-lasting impact on growth and FDI inflows than Moody’s currently expects which would heighten Ethiopia’s external vulnerability.

The long-term local currency bonds and bank deposits ceilings remain unchanged at Ba3. The long-term foreign currency bonds and bank deposits ceilings remain unchanged at B1 and B2, respectively.

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