The African Export-Import Bank (Afreximbank) has put an end to its credit rating relationship with Fitch Ratings, accusing the agency of failing to understand its mandate. The Cairo-based multilateral financial institution announced the decision this week following its review of the relationship with Fitch Ratings - a New York based agency. The Bank said its firm belief is that Fitch’s credit rating exercise no longer reflects a good understanding of the Bank’s Establishment Agreement, its mission and its mandate. “Afreximbank’s business profile remains robust, underpinned by strong shareholder relationships and the legal protections embedded in its Establishment Agreement, signed and ratified by its member states,” the bank said in a press statement. The move, which comes months after the ratings agency downgraded Afreximbank to one notch above junk status, underscores tensions in the debate over Western institutions’ influence over perceived risks in Africa that can lead to steep capital costs. Fitch’s downgrade focused heightened scrutiny on Afreximbank, which stands accused of “weak risk management policies” and “high solvency risks.” In June last year, Fitch downgraded Afreximbank down to a BBB- rating with a negative outlook from a BBB stable outlook, rating noting higher risks from its sovereign loans being restructured. Fitch cited concerns over non-performing sovereign loans in Ghana and Zambia, which totalled $750mn and $45mn respectively. The bank also has exposure to Malawi and South Sudan. Afreximbank had argued it should benefit from preferred creditor status, in line with typical MDB treatment, which would limit the likelihood of losses. However, government representatives and other creditors sought to include those loans in wider restructuring efforts. Officials countered that, because rates on those loans were higher than for traditional concessional finance, they should instead be treated as commercial facilities. Fitch said restructuring the loans would heighten the risks associated with Afreximbank’s strategy, and that its non-performing loan ratio should be recorded at 7.1% rather than the 2.3% reported by the bank. But Afreximbank said in response that Fitch’s decision was “hinged on the erroneous view” that its establishing treaty – which it said confirms its preferred credit status – can be “violated by the bank without consequences”.
