The July 2 credit downgrading of the Afreximbank by Moody’s and Fitch rating agencies appears to be politically motivated if not unfair. The reason for the downgrading is a claim that the bank holds too many non-performing loans. Nonetheless experts assert that the decision ignored international standards and treaty-backed loan guarantees. The downgrade will make raising funds more expensive at a time when it is well known that African countries are forced to pay high interest rates even though the continent has a relatively low level of bankruptcies and non-performing loans. As a multilateral government institution, the Afreximbank is a treaty-based institution of its member states and loans credits to those states.
According to the African Union’s African Peer Review Mechanism (APRM) the bank’s performance data reveals a non-performing loan ratio of just 2.44% as of December 2023—well below the 10% assumption used in the downgrade. Furthermore APRM revealed that over 80% of the bank’s sovereign exposures are backed by intergovernmental treaties and preferred creditor status, which significantly lowers default risk. The African credit monitor is now calling for dialogue and corrections to protect Africa’s financial standing, Sputnik reports.
