Standard and Poor’s assigns “BB- / B” sovereign ratings to Côte d’Ivoire with stable outlook

-The elephant sheltered from exogenous shocks thanks to its membership in the UEMOA zone.

-An increased robustness through the special BCEAO window for the refinancing of “COVID-19 Treasury bills.”

S&P Global Ratings has assigned Côte d’Ivoire, as of July 6, 2021, long and short-term sovereign credit ratings in foreign and local currencies “BB- / B”. The outlook is stable denoting the balance between expectations of strong economic growth, supported by improved policymaking supporting a decline in twin deficits in the coming years and, on the other hand, the risk of fiscal slippage and persistent socio-political tensions.

S & P’s opinion is based on forecasts of 6% growth in Ivorian GDP in 2021, then 6.5% in the 2022-2024 interval. Another factor taken into account is the implementation of continuous structural economic reforms, supported by the implementation of the third National Development Plan (PND), a five-year program, underpinning strong prospects for economic growth and fiscal consolidation. In light of the reforms, the budget deficit is expected to drop below 3% by 2023.

In S&P’s view, external and government funding is likely to decline, but will remain significant, given the large investment needs for key infrastructure and the narrow tax base, reflecting among other things the low GDP per capita of the country which is of $ 2,313 in 2020.

 

In the coming years, the Ivorian authorities plan to increase energy production through several ongoing projects, to 3,428 megawatts (MW) in 2025 from 2,229 MW in 2020.

The country’s economy is relatively diversified and dominated by services, which account for around 50% of real GDP. Over the past five years, the construction sector has grown rapidly, reflecting investment in infrastructure, accounting for nearly 10% of real GDP in 2020, up from 5% in 2015. At the same time, the share of agriculture fell to less than 16% from 20% in 2015. Over 60% of agricultural production goes to export. The country’s main export is cocoa, which accounts for nearly 40% of the volume, followed by hydrocarbon and gold exports for 15% and 10% respectively, and cashews at 6%.

Strong relationships with international financial institutions

The Ivory Coast benefits from solid relations with international institutions and bilateral partners, which give it access to significant concessional financing and solid political anchoring. In December 2020, the IMF concluded its four-year program for Côte d’Ivoire which resulted in the disbursement of $ 278.2 million and $ 1.21 billion during the program. To help the country overcome the consequences of COVID-19, the IMF disbursed $ 886 million in emergency funding, leading to a combined total disbursement of over $ 1.1 billion in 2020. “We expect the IMF’s involvement in government policy to continue, although potentially without a new program, ”opines S&P. And the rating agency believes that while Côte d’Ivoire’s membership in WAEMU limits monetary flexibility, it also allows it to contain inflation and provide protection against external risks.

Fundamental support from the BCEAO

The Regional Central Bank (BCEAO) has been at the forefront of the region’s response to the pandemic, implementing measures to help member states weather the crisis.

For example, explains S&P, the BCEAO has:

– increased the liquidity available to banks;

– broadened the guarantee framework to access central bank refinancing to include bank loans to 1,700 prequalified private companies;

– Extended by one year the five-year period initiated in 2018 for the transition to Basel II / III banking prudential requirements. In particular, the regulatory capital ratio remained unchanged at the end of 2020 at 9.5%, the same level as in 2019. This ratio will gradually increase to 11.5% in 2023 instead of 2022;

In addition, the BCEAO has created a special refinancing window for “COVID-19 treasury bills”, issued in the regional market by member states, thereby increasing the liquidity available at a lower than market rate. These Treasury bills can be fully refinanced at a fixed rate of 2.5%.

For its part, the service of the external commercial debt of the Ivory Coast will oscillate between 418 billion XOF in 2021 and 555 billion XOF in 2024 (approximately 1.2% of the GDP) while the total service of the external debt will oscillate between XOF 690 billion in 2021 and XOF 1.13 trillion in 2024 (between 2% and 2.4% of GDP).

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