Dec. 3 (Bloomberg) -- Ethiopia, Africa’s fastest-growing economy over the past five years, plans to obtain a credit rating to attract more foreign direct investment and offset a decline in exports.
The Horn of Africa nation’s government will select two or three rating companies within weeks to assess the country, Finance Minister Sufian Ahmed said in an interview yesterday in the capital, Addis Ababa. The state has no plans at this stage to tap international debt markets for funds to finance its infrastructure development program, he said.
“The intention is basically to show foreign direct investors where Ethiopia is in terms of those criteria,” Sufian said.
Ethiopia, Africa’s largest coffee producer and the origin of the plant, grew an average of 10.3 percent from 2008 to 2012, according to International Monetary Fund data. The economy is forecast to expand 7.5 percent next year, compared with an estimated 7 percent this year, the Washington-based lender said in October.
The country needs increased foreign investment to offset a current account deficit that has become a “major concern,” Sufian said at the African High-Growth Markets Summit in Addis Ababa. The deficit grew to $3 billion in the 12 months to July 7, the end of the fiscal year in the Ethiopian calendar, from $2.8 billion a year earlier as export growth slowed, according to the IMF.
Fitch Ratings’ London-based spokesman Peter Fitzpatrick and Moody’s Investors Service spokeswoman Kirsten Knight didn’t immediately respond to e-mailed requests for comment. No one was available for comment when Bloomberg called Standard & Poor’s offices in London outside normal business hours.
Foreign direct investment is expected to total 2.8 percent of gross domestic product this fiscal year and average 4.5 percent in the “long run” if the government adopts policies that promote private business, the IMF said.
The government won’t allow foreign investment in banking, telecommunications and other industries monopolized by the state or barred to non-Ethiopian companies until regulation is strengthened, Sufian said.
“Once we are comfortable, then the government will consider,” he said. “I can’t give you an exact date.”
The Ethiopian government plans to spend 105.2 billion Ethiopian birr ($5.5 billion) on infrastructure and industry including hydropower dams and sugar plants in the 12 months ended July 7 and 70.7 billion birr next year, according to a five-year growth plan that ends in mid-2015.
“The main challenge is investment financing needs,” Sufian said. “We know it’s huge.”
Funding targets will be met by increased domestic financing and borrowing as much as $1 billion a year on non-concessional terms from China, India and Turkey, he said. Key projects will also be prioritized, he said.
Ethiopia is Africa’s second-most populous nation, after Nigeria.
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