Cameroon - Fitch affirms risk rating at B

Fitch released its latest sovereign risk rating review for Cameroon on Friday, November 27. The rating agency decided to maintain Cameroon’s rating at “B”, while at the same time keeping the outlook at stable. Fitch stated that Cameroon’s rating remains constrained by the country’s low income per capita and structural weaknesses, such as political and governance risks. In turn, the rating is supported by the stable macroeconomic environment and membership to the Central African Economic and Monetary Community (CEMAC). Fitch also notes that the stable outlook reflects its assessment that while downside risks to the rating have increased, the upside and downside risks remain largely balanced. The main risk factors that could trigger a negative rating action are: A greater slippage in the budget, which would accelerate public debt accumulation; A widening current account deficit; Political events triggered at the time of the succession of President Paul Biya or an intensification of terrorist activity in the north by Boko Haram; and A slowdown of GDP growth. On the positive side, the following occurrences could trigger positive rating action in the future: A concerted effort by the authorities to improve the management of public finances; Effective measures to improve the business climate and economic growth; and An increase in hydrocarbons production related to new discoveries coming on-stream. WHY DO WE CARE?  The stable ratings outcome continues to be in line with our expectations – we also rate Cameroon at “B” with a stable outlook. Real GDP growth prospects remain favourable , with Fitch anticipating average economic growth of 5.5% p.a. over the 2015-17 period – our expectation is for real GDP to expand at 5.4% p.a. over the same period. What remains an area of great concern for both ourselves and Fitch is the authorities’ ability to effectively utilise investment funding in order to maximise the economic growth benefits thereof. The government’s past track record with respect to investment spending has not been stellar, with major infrastructure projects being delayed for months on end. Ultimately, it is of paramount importance that borrowed funds be utilised effectively, especially in light of Cameroon’s growing borrowing costs and large government arrears. These factors will continue to drag down the country’s sovereign credit rating. Analyst: Calumet Links