Net borrowing by Middle Eastern and African rated sovereigns is forecast to fall to only $6 billion in 2007, from $15 billion in 2006, due to large debt repayments, Standard & Poor's Ratings Services said today in its third annual Middle East and Africa (MEA) sovereign issuance survey.
The report titled "Middle East and Africa Sovereign Issuance Outlook: Refinancing To Dominate Borrowing In 2006," includes government borrowing data for the 11 rated Middle Eastern and North African sovereigns and for the rated sub-Saharan African sovereigns--now numbering 13 since ratings were assigned to Kenya and the Seychelles in September 2006.
The low level of commercial borrowing in 2007 (down to $54 billion gross, from $59 billion in 2006) follows a year in which the region's sovereigns made net repayments of debt, driven by the strong fiscal outturns in the oil-exporting countries, as well as repayments by Egypt.
"Although declining, continued high oil prices have had a positive fiscal effect on many countries in the region, especially in the Gulf states, which are all expected to sustain fiscal surpluses in 2007," said Standard & Poor's credit analyst Farouk Soussa. "Encouragingly, these unforeseen oil revenues have been mainly set aside in stabilization funds for future use, or used to pay down domestic debt, so that borrowing by these countries in 2007 is purely to finance amortizations and to maintain a level of government debt necessary for monetary policy purposes."
Outside the Gulf, Cameroon and Nigeria--the only African oil exporters currently rated by Standard & Poor's--are, together with the Seychelles, the only African countries for which a budget surplus is expected. Nigeria, in particular, has been posting significant budget surpluses in recent years, which has allowed the country's Excess Crude Account to accumulate significant reserves.
The vast majority (83%) of outstanding commercial debt is in local currency obligations, reflecting the fact that a large number of countries in the region, particularly in Africa, rely on domestic financing for any commercial borrowing, with their external financing provided by multilateral and official agencies. There are, however, a number of sovereigns that have a significant proportion of foreign debt in the total. Lebanon tops the list, with slightly more than 45% of its total debt stock in 2006 owed to foreign commercial lenders, mainly in the Eurobond market, as it seeks to finance persistent budget deficits.
"Given that most sub-Saharan African and Gulf countries have limited commercial borrowing requirements, the larger of the remaining countries naturally make up the bulk of borrowing requirements," said Mr. Soussa. "Indeed, South Africa, Israel, and Egypt alone account for $34.4 billion of gross commercial borrowing in 2007, almost 60% of the total."
Analyst Contacts:
Farouk Soussa, London
Press Office Contacts:
London Media Hotline: +44 20 7176 3605
Paris: +33 1 44 20 6740
Frankfurt: +49 69 33999 225
Milan: +39 02 72 111 245
Madrid: +34 91 389 6944
Moscow: +7 495 783 4017
Stockholm: +46 8 440 5916
media_europe@standardandpoors.com
Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of financial market intelligence, including independent credit ratings, indices, risk evaluation, investment research and data. With approximately 8,500 employees, including wholly owned affiliates, located in 21 countries. Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com.
