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STANDARD & POOR’S RATINGS : reasons for the decline in Cameroon’s rating

In a note made public on August 8, 2023, the American financial rating agency, Standard & Poor’s Global Rating, downgraded Cameroon’s rating. A new restrictive situation for the country which is preparing to carry out an international fundraising.

The agency explains the decline in Cameroon’s rating by The following ; « We have lowered Cameroon’s rating to SD/SD, following delays in payment of principal and interest on the country’s long-term debt ». Standard & Poor’s justifies its action by the fact that Yaoundé has not honored its commitments vis-à-vis Deutsche Bank Spain, a private creditor whose outstanding debt on the country is 20.75 billion FCFA at the end of June according to the Autonomous Depreciation Fund (CAA). « The government has delayed payments to Deutsche Bank Spain beyond the due date, » the agency says.

According to S&P, the expenses intended to subsidize the prices at the pump of hydrocarbons have reached a peak of 900 billion FCFA in 2022 due to the soaring oil prices on the international market. « The rise in global oil and natural gas prices has boosted current account receipts and government revenues in Cameroon », a hydrocarbon exporter says. Nevertheless, this has also led to a growing gap between import prices for refined petroleum products and domestic prices at the pump, which the government has kept fixed throughout the year. This has created pressures on unbudgeted expenses, » explains the agency.

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S&P fears that the recent decision of the Nigerian government to abolish its fuel subsidy program could lead to new fiscal pressures on Cameroon. « The end of fuel smuggling from Nigeria has pushed up gasoline prices in the border regions of northern Cameroon. Which could lead to political pressure on the authorities to compensate households and businesses affected by this increase ».

This bad rating means that Cameroon could be called upon to pay more for the annual coupons on its current eurobonds. Moreover, in the event that it contracts new commercial loans on the international market, Cameroon will have to pay much more given the level of risk it now represents for investors.
This comes as a blow for Cameroon which is preparing by the end of the year a foreign currency loan of 200 billion.

Sorelle Ninguem

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