Moody's downgrades Afreximbank amidst mounting debt concerns

The African Export-Import Bank (Afreximbank) has been hit with another downgrade, this time by Moody's, another major international credit rating agency. This downgrade follows a similar move by Fitch only four weeks ago.

Moody's lowered Afreximbank's rating from Baa1 to Baa2: two notches above "junk" status. This downgrade does not come as a surprise. Moody's flagged Afreximbank’s credit risks already in a rating report issued in 2024, raising doubts about Afreximbank’s asset quality and performance. Just a month ago, Fitch had estimated Afreximbank's non-performing loans at 7.1% by the end of 2024, exceeding Fitch's 6% "high risk" threshold.

The African Peer Review Mechanism (APRM) contested Fitch's assessment. It argued that Fitch confused loan restructuring requests from South Sudan, Zambia, and Ghana by considering them as defaults, claiming this was inconsistent with the 1993 treaty establishing Afreximbank.

However, the credit agencies' concerns appear to have some basis. South Sudan's default is evident, as Afreximbank sued the country and recently won a US$657 million arbitration case against the South Sudan central bank in London on May 8, 2025. Similarly, Zambia declared a default in early June, disputing the Afreximbank's "preferred-creditor status" claim and classifying its loans as commercial and thus subject to restructuring. Ghana is facing a similar situation.

Regardless from who is ultimately correct about Afreximbank's preferred creditor status, the implications of these downgrades for Africa are significant. They could force Afreximbank to absorb losses, and more critically, they could severely restrict the continent's access to affordable trade finance. Africa already grapples with a substantial trade finance gap which Afreximbank, in the recently published Africa Trade Report 2025, estimated at approximately US100 billion annually. Lower rating means higher borrowing costs for Afreximbank, which could directly impact its ability to lend and the low rates at which it does so. The role of credit rating agencies ratings on sovereign borrowing cost has been analysed recently in this publication by UNCTAD.