‘Erroneous view’ — Afreximbank reacts to Fitch’s negative outlook

The African Export-Import Bank (Afreximbank) has faulted a recent assessment by global ratings agency Fitch, reaffirming its strong financial position and non-participation in sovereign debt restructuring arrangements.

In a statement on Tuesday, the bank said its financial reporting adheres strictly to International Financial Reporting Standards (IFRS), including IFRS 9, which governs how non-performing loans (NPLs) are classified.

On June 4, Fitch revised Afreximbank’s outlook from stable to negative, citing the risk that loans to some African sovereigns might be restructured.

The global ratings agency also downgraded the bank’s short-term issuer default rating (IDR) to ‘F3’ from ‘F2,’ and the long-term ratings on its global medium-term note programme and debt issuances to ‘BBB-‘ from ‘BBB’

However, in its response, the bank described the ratings as “erroneous,” saying it does not participate in debt restructuring negotiations for any member country.

“Fitch’s ‘negative outlook’ decision, which it says reflects ‘the risk that the debt owed to Afreximbank by some of its sovereign borrowers may be restructured’, is hinged on the erroneous view, in some quarters, that the treaty establishing Afreximbank, executed by its 53 participating African states, can be violated by the Bank without consequences,” the bank said.

“For clarity, the Bank establishment agreement is a treaty entered into by, and among, all participating states and between the participating states and the Bank.

“Accordingly, Afreximbank would like to reaffirm that it is not participating in debt restructuring negotiations related to any of its member countries.

“To do so would be inconsistent with the Bank establishment treaty.

“The treatment of its loans and other activities is governed by the treaty and not by classifications created outside its framework.

“The Bank’s application of IFRS 9 is comprehensively detailed in its 2024 Financial Statements and further clarified in the external auditors’ report. Fitch’s definition of NPLs differs from the Bank’s approach, which makes use of forward-looking information.”

‘STRONG EQUITY AND LIQUIDITY BUFFERS’

Despite the negative outlook, Afreximbank said Fitch acknowledged several positive indicators of the bank’s financial health, including strong capitalisation, low concentration risk and a high quality of treasury assets that “support a strong liquidity assessment”.

The Bank said it believes that the factors reinforce the overall soundness of its risk management framework.

“Afreximbank’s financial resilience, robust governance and unwavering commitment to excellence, and to Africa, are critical to the delivery of its mandate,” the lender added.

The bank reaffirmed its commitment to supporting African economies through trade-led growth and macroeconomic stability, especially in a challenging global environment.