Fitch affirms AfDB's triple A rating with stable outlook

AFRICAN BUSINESS AND ECONOMYJuly 10, 2024 at 12:18 PM UTC

TLDR

Fitch Ratings renews AfDB's AAA rating with stable outlook, allowing lower cost financing.
AfDB increases callable capital by 58.2% to USD 318 million to maintain rating and strengthen financial safety cushion.
Positive signal to investors as AfDB receives extraordinary support from non-regional shareholders.

Fitch Ratings has renewed the African Development Bank's (AfDB) AAA rating on July 5, with a stable outlook. It remains to be seen whether other agencies, such as S&P, Moody's, and Japan Credit Ratings, will reach the same assessment.

This decision allows the pan-African institution to raise financing at a lower cost. Fitch explained that the rating was motivated by the extraordinary support the bank received from non-regional shareholders.

To strengthen its financial safety cushion and maintain its rating, the Board of Governors approved an increase in callable capital by 58.2% to $318 million last June. This move sends a positive signal to investors.

Key Takeaways

AfDB's issuer profile was almost compromised by the downgrade of the United States' sovereign rating in August 2023. The U.S. is the bank's second-largest shareholder, holding 6.52% of the total capital and 38% of the callable capital—the portion subscribed by shareholders as a commitment to disburse in the event of the institution's default. According to Fitch, the AfDB's debt coverage rate significantly declined following the American rating downgrade, dropping from 217% of total loans at the end of 2022 to 125% a year later.

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