Thursday, May 31, 2012

Fitch Lifts Cameroon's Rating On Improved Domestic Debt Management

By Nathalie Tadena
Fitch Ratings raised its ratings on the Republic of Cameroon one notch closer to investment grade, pointing to the Central African country's improvement in domestic debt management.
Fitch upgraded its long-term foreign currency issuer default rating to B, five levels away from investment grade, from B-minus. The outlook is stable. 

The firm said Cameroon's rating is supported by the economy's continued recovery from the global financial crisis, helped by rebound in oil production and revenues and higher public investment. 

Fitch also noted that the issuance of T-bill and bonds in the domestic market since late 2010 and no recorded delays in interest payments have helped forge a track record of stronger sovereign debt service. Cameroon's public debt is low compared to its peers, reflecting substantial debt alleviation obtained in 2006.
Fitch noted that Cameroon's economic growth has historically been low compared to other sub-Saharan African countries due to insufficient investment in energy and transport infrastructure. 

However, economic growth improved to 4.2% last year as several large infrastructure projects were launched and oil prices rose. Growth is expected to reach 4.7% this year, Fitch said. 

The firm also noted that Cameroon's economy, though largely informal and heavily reliant on agriculture and commodities, is more diversified towards manufacturing than many sub-Saharan countries. The firm noted that oil production, which had been declining over the past decade, represented 7.1% of the country's gross domestic product and 35.8% of exports last year. Fitch said output is expected to increase this year, a trend that will continue in the coming years. 

Fitch said Cameroon's ratings would benefit from a longer track record of sound sovereign debt service, as well as improved public financial management. The firm said a prolonged increase in oil output and greater investment in infrastructure would also help its ratings.

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