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Rise in Infections Undermines Africa Ratings Analysis

Rise in Infections Undermines Africa Ratings Analysis

Financial ratings agency Fitch Ratings today deemed that the rise in covid-19 infections in Africa undermines the continent’s sovereign credit quality analysis until at least 2022.

“A new wave of covid-19 infections in several African countries, exacerbated by the Delta variant, has increased the risk of economic setbacks to Africa’s credit quality analysis, and slow progress in vaccine distribution will persist until at least 2022,” reads an analysis by Fitch Ratings.

In the commentary on the impact of the pandemic on African countries, sent to clients and to which Lusa had access, the analysts of this rating agency owned by the same owners of consultancy Fitch Solutions wrote that “the continent’s governments should continue to avoid imposing widespread confinement, but containment measures, such as the closure of bars and restaurants that has existed in South Africa since June 28, could happen in several countries.”

The capacity to impose tougher restrictions “is weak in the region and restrictions are unpopular,” the analysts point out, stressing that structural factors such as low levels of technological penetration or formal employment prevent the adoption of measures such as telework or the use of digital commerce.

The World Health Organisation’s director for Africa said on Thursday that the African continent had “the worst week since the pandemic began”, with a 20 per cent rise in cases, and warned that the situation will get worse.

Speaking at a press conference, Matshidiso Moeti warned that in the last seven days to 4 July, the number of cases on the African continent had risen by 20 per cent and considered that due to the spread of the Delta variant, the situation was likely to worsen, with 16 countries where the virus was gaining ground.

“We had 251,000 new cases, an increase of 20% compared to the previous week and 12% compared to the peak in January,” Moeti said, stressing that “new cases increased for the seventh consecutive week and are doubling every 18 days.”

On the financing of economies, Fitch Ratings says that “the pandemic continues to pose downside risks to the region’s ratings”, but points out that, on the other hand, “the effects make external financing from bilateral or multilateral sources easier”.

The commentary, issued at the same time as the International Monetary Fund (IMF) approved the issuance of $650 billion in Special Drawing Rights (SDRs), also points out that the recessionary effects of falling oil prices and lower demand from major trading partners such as China have faded.

“More recently, the rise in commodity prices has proved positive for the external position of commodity-exporting countries,” they point out, using the example of Angola to stress that “the risk associated with government revenues should outweigh the budgetary impact of new covid-19 infections this year.”

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