Strong economic growth and historically low levels of inflation look set to support African sovereign credit ratings in the near term, says Standard & Poor’s Ratings Services, in a report.

The third edition of the Standard & Poor’s Sovereign Ratings In Africa report, released on the occasion of the 2005 annual meetings of the African Development Bank (AfDB) in Abuja, contains summary analyses of all 13 sovereigns on the continent that are currently rated by the agency. It also has an entry on AfDB itself (AAA/Stable/A-1+), Africa’s flagship multilateral development finance institution.

“The majority of the assigned ratings benefit from stable outlooks, and only one rated African sovereign, namely the Republic of Cameroon, faced a deterioration of credit quality in 2004,” said Standard & Poor’s credit analyst Konrad Reuss. “Nevertheless, this overall positive assessment for credit quality in the region should not obscure the challenges that African sovereigns face.”

In particular, sub-Saharan sovereigns (with the notable exception of South Africa; foreign currency BBB/Stable/A-3) continue to be vulnerable to exogenous shocks, such as large swings in oil and other commodity prices or drought, while potential political conflict can still easily have a destabilizing impact.

“The current strength of the global and regional economy, as well as significant goodwill from the donor community, is clearly an opportunity for African governments to make progress on pursuing poverty reduction, achieving greater economic diversification, strengthening fiscal management, and accelerating economic reforms,” notes Reuss.

This edition also includes remarks on the West African Economic and Monetary Union (Waemu) and the Central African Economic and Monetary Community (Cemac), which continue to notch up successes in promoting economic stability, reforms, and fiscal discipline among their member states through economic convergence criteria and collective surveillance.