Latest news with #sovereignexposures
Zawya
10-06-2025
- Business
- Zawya
Statement by African Export-Import Bank (Afreximbank) on recent Fitch Ratings Report
Afreximbank ( operates under very high standards of financial transparency. The Bank's financial reporting strictly adheres to International Financial Reporting Standards (IFRS), including IFRS 9. This standard governs the classification and staging of loan performance, including the treatment of non-performing loans, amongst other matters. The Bank's application of IFRS 9 is comprehensively detailed in its 2024 Financial Statements and further clarified in the external auditors' report. As cited in the ratings report, dated 4 June 2025, ' Fitch's definition of NPLs differs from the Bank's approach, which makes use of forward-looking information '. It is important to note that Fitch acknowledges Afreximbank's financial resilience, highlighting that ' the bank operates with a high level of collateral and credit risk mitigants and has already taken relatively large provisions on some sovereign exposures, which would reduce any potential further negative financial impact for the bank'. Fitch also acknowledges the Bank's strong capitalization including its ' strong equity to assets and guarantees ratio' and 'excellent internal capital generation'. Concentration risk is also reported as 'low' and its liquidity assessment of 'a' reflects the Bank's ' strong quality of treasury assets '. The Bank believes that these factors reinforce the overall soundness of the Bank's risk management framework. Fitch's 'negative outlook' decision, which it says reflects ' the risk that the debt owed to Afreximbank by some of its sovereign borrowers may be restructured ', is hinged on the erroneous view, in some quarters, that the treaty establishing Afreximbank, executed by its 53 participating African states, can be violated by the Bank without consequences. For clarity, the Bank establishment agreement is a treaty entered into by, and among, all participating states and between the participating states and the Bank. Accordingly, Afreximbank would like to reaffirm that it is not participating in debt restructuring negotiations related to any of its member countries. To do so would be inconsistent with the Bank establishment treaty. The treatment of its loans and other activities is governed by the treaty and not by classifications created outside its framework. Afreximbank's financial resilience, robust governance and unwavering commitment to excellence, and to Africa, are critical to the delivery of its mandate. The Bank remains committed to supporting its member countries in navigating their economic challenges while promoting trade-led growth, economic development and general macroeconomic stability. Distributed by APO Group on behalf of Afreximbank.
Zawya
08-06-2025
- Business
- Zawya
African Peer Review Mechanism (APRM): 'Fitch's Downgrade of Afreximbank's Rating is Based on Flawed Loan Classification'
In line with Decision [Assembly/AU/Dec.631(XXVII)] of the African Union Assembly of Heads of State and Government and Article 6(g) of the African Peer Review Mechanism (APRM) Statute (2020), which together mandate the APRM to provide support to African countries in the field of credit ratings. The APRM routinely undertakes independent analyses of rating actions and commentaries issued by international credit rating agencies on African sovereigns and multilateral financial institutions. On 4 June 2025, Fitch Ratings downgraded African Export-Import Bank (Afreximbank), lowering its long-term foreign currency issuer default rating from 'BBB' to 'BBB-' with a negative outlook. Fitch justified its decision by citing a perceived increase in credit risk and weak risk management policies, based on its estimate that the bank's non-performing loans (NPLs) stood at 7.1%. This estimate stems from Fitch's classification of exposures to the sovereign Governments of Ghana (2.4%), South Sudan (2.1%) and Zambia (0.2%) as NPLs. Notably, this 7.1% figure is significantly higher than the 2.44% ratio reported by Afreximbank in its own disclosures. The APRM notes with concern Fitch Ratings' misclassification of Afreximbank's sovereign exposures to the Governments of Ghana, South Sudan and Zambia as NPLs. This classification raises critical legal, institutional and analytical issues which the APRM strongly contests. The assumption that Ghana, South Sudan and Zambia would default on their loans to Afreximbank is inconsistent with the 1993 Treaty establishing the Bank to which Ghana and Zambia are both founding members, shareholders and signatories. The Multilateral Treaty signed in 1993 is legally binding on all member countries, imposing specific legal obligations related to the Bank's protection, immunities and financial operations. By virtue of this Treaty, loans extended by Afreximbank to its member countries are governed by a framework of intergovernmental cooperation and mutual commitment, rather than typical commercial risk principles. It is, therefore, legally incongruent to classify a loan to member countries as non-performing, especially when the borrower states are shareholders in the lender institution, no formal default has occurred and none of the sovereigns have repudiated the obligation. Fitch's unilateral treatment of these sovereign exposures – as comparable to market-based commercial loans – despite their backing by treaty obligations and shareholder equity stakes, is flawed. Doing so reflects a misunderstanding of the governance architecture of African financial institutions and the nature of intra-African development finance. Fitch has misinterpreted the invitation extended by Ghana, South Sudan and Zambia to Afreximbank to discuss the loan repayments as signalling an intention to default and/or to lift the Preferred Creditor Status. The APRM calls upon Fitch Ratings to re-examine its criteria and assumptions in this case and to engage in technical consultations with Afreximbank and other relevant African stakeholders. Objective, transparent and context-intelligent credit assessments are critical to ensuring fair treatment of African institutions in the global financial system. The APRM reaffirms its commitment to promoting accuracy in the credit ratings. Distributed by APO Group on behalf of Afreximbank. APRM CREDIT RATING RESEARCH &ADVISORY For inquiries contact: Dr McBride Nkhalamba Ag. Director of Governance&Specialised Reporting Dr Misheck Mutize Lead Expert on Credit Rating Agencies Ms. Ejigayhu Tefera Researcher For media inquiries or further information, please contact the APRM Continental Secretariat at info@ @ APRMorg – X
