Cameroun receives a Big punch on the face, as Moody further downgrade its outlook
In April 2017, when I announced that Moody and Fitch had downgraded Cameroun’s credit rating to B2 & B respectively, it didn’t quite sink well to many, as both agencies still reluctantly maintained a positive outlook for Cameroun. It’s just over a year, and the story is different and one creating panic in Yaounde.The bad news reaching Yaounde is that Moody has further downgraded Cameroun’s credit rating (in other words it credit worthiness) and changed it’s outlook from Stable to Negative.
What this means is that the credit rating agency no longer has confidence in Camerouns financial future and it’s ability to continue serving its debts. (In other words, the risk of Cameroun defaulting on its debts is getting higher by day) and even more worrying for Yaounde is Moody’s reason for the negative outlooking rating. According to Moody, the persistent political instability (in other words, the Anglophone conflict) in the country is a major worrying factor. There is hightened uncertainty.
Let me explain this further to those with limited knowledge on what all these means.
Credit ratings are like red flags to potential borrowers. They give an idea to borrowers on your ability to pay back your debt, implying the lower your credit rating is, the less likely people (institutions) will be willing to borrow money to you.
Those who are willing to take the risk and borrow you some money, will do so at a very high interest rate, so as to mitigate for the risk incase you default. When I made the announcment in April 2017, Cameroun’s public debt (a.k.a national debt) was US $18 636 130 339 which was FCFA 11,213,637,499,532.60.
Today, just a year later, the debt has increased by more than 4billion US Dollars and stands at US $22 722 696 701 (FCFA13,058,900,000,000).
What this means is that, each and every “Cameroonian” owes an average of US $901 (FCFA 517,814) i.e (Five hundred and seventeen thousands, eight hundred and fourteen france to creditors). That’s an increase of almost US $200 debt for every Cameroonian within just one year.
I am breaking this down to paint a realistic picture, so that everyone should see where Cameroun is heading to and why they can not sustain this senseless war for any much longer, except the entire country is remortgaged at a very high price (a rate worse than what it is already being mortgaged to France and China at)I will leave you at this point to make the calculations at what the cost will be by the time this second war enters its 3rd or 4th year, assuming Cameroun will still be on its feet.
Note: All figures used in this article are real and from credible financial sources.
© E. Acha
12 August 2018