Countries taking G20’s new debt relief route face Ethiopia-style downgrades – Fitch
LONDON, Feb.11 (Reuters) – Rating agency Fitch is likely to downgrade any country that tracks Ethiopia and asks to use a new debt relief program from the group of major G20 economies, the G20 group said on Thursday. one of its main analysts.
Fitch cut Ethiopia’s credit rating by two notches this week after Addis Ababa announced it could be the first with an international state obligation to use a new G20 ‘common framework’ plan .
The program, which is open to more than 70 of the world’s poorest countries, encourages their governments to defer or negotiate their external debt as part of a larger debt relief program.
“It is likely that all other countries that are candidates for the G20 common framework will be considered Ethiopia,” Jan Friederich, head of Middle East and Africa sovereign ratings at Fitch, told Reuters.
According to him, the only reason not to lower the rating would be if the agency was satisfied that private sector creditors who hold the bonds to which the credit ratings apply will not be affected. However, this seems unlikely in the most indebted cases.
“There is a lot of pressure from the public sector (major governments and the International Monetary Fund) for countries to use these instruments that are available.”
“We had interactions with the official side which showed clear frustration with the lack of private sector involvement.”
Any country that deferred or reduced its private sector debt would be in default.
Along with Ethiopia, Fitch currently has groups like Congo, Gabon, Mozambique and Angola in the CCC classification category of the Default Danger Zone. the IMF also reports that Kenya, Ghana, Cameroon and Cape Verde are at “high risk” of debt distress.
Friederich believes, however, that there are differences, particularly in Ghana and Kenya which seem particularly keen on retaining access to international capital markets.
“We are obviously looking at all the countries that are eligible for the G20 common framework and whether it is plausible, if not likely, that they will join it.”
“But Ethiopia is a special case and the implications for ratings (more broadly) should not be overstated either.” (Reporting by Marc Jones; Editing by Toby Chopra)