Afreximbank treaty tested to the core by Fitch’s call

• Fitch Ratings ‘negative outlook’ on Afreximbank brings up a debate on how multilateral development finance institutions operating under treaty law should be evaluated.
• Afreximbank’s position is that risk assessments must take into account not just financial data but also the institutional frameworks and legal covenants that define its operations.
• The bank urges a more nuanced understanding of institutions like itself—whose mandates, legal structures, and risk profiles are unlike those of commercial entities.

The African Export-Import Bank (Afreximbank) has come out guns blazing, defending its financial and operational integrity following the June 4^th undertaking by global credit ratings agency Fitch to assign a negative outlook to the institution. At the heart of the matter lies a divergence in the interpretation of risk—particularly concerning sovereign debt—and the legal sanctity of the treaty that underpins Afreximbank’s core business.

Despite Fitch’s concern, Afreximbank maintains it operates under exceptionally high standards of financial transparency and governance. The Bank adheres strictly to International Financial Reporting Standards (IFRS), especially IFRS 9, which regulates the classification and performance of loans, including non-performing loans (NPLs), notes a statement dated June 10, 2025.

According to the Bank, its interpretation of IFRS 9 integrates forward-looking information—an approach that differs from Fitch’s methodology. The distinction is not trivial; it influences how the Bank’s risk profile is publicly portrayed, the Pan-African lender explained.

Strong fundamentals acknowledged

In its report dated 4 June 2025, Fitch does not entirely dismiss Afreximbank’s strengths. On the contrary, the agency acknowledges the Bank’s solid financial footing. Fitch notes that Afreximbank operates with “a high level of collateral and credit risk mitigants” and has proactively made “relatively large provisions on some sovereign exposures,” thereby reducing the potential for significant future financial distress.

Further, the Bank’s capitalization was rated positively. Fitch commended Afreximbank’s “strong equity to assets and guarantees ratio” and described its internal capital generation capacity as “excellent.” Concentration risk was assessed as “low,” and liquidity received an “a” grade, indicating the presence of high-quality treasury assets.

These recognitions bolster Afreximbank’s claim to financial resilience and underscore the robustness of its risk management framework.

Afreximbank’s treaty question

Yet, Fitch’s issuance of a negative outlook rests on more than accounting standards. The agency cites “the risk that the debt owed to Afreximbank by some of its sovereign borrowers may be restructured.” This projection has prompted sharp rebuttals from the Bank, which asserts that such a scenario would be in direct conflict with the legal foundations of its operations.

Afreximbank was established through a multilateral treaty signed by 53 African nations. This treaty forms the Bank’s constitutional bedrock, setting forth its obligations and rights between member states and the institution. It is, by international law standards, a binding agreement.

To suggest that the Bank could partake in sovereign debt restructuring without contravening this treaty is, in Afreximbank’s view, a flawed assumption. “The Bank establishment agreement is a treaty entered into by, and among, all participating states and between the participating states and the Bank,” the institution noted in response to Fitch’s assessment.

Accordingly, Afreximbank firmly states that it is not engaged in any debt restructuring talks with member countries and that doing so would be inconsistent with its treaty obligations.

Mandate and mission undeterred

Even as its legal footing is scrutinized, Afreximbank remains committed to its central mission: supporting African nations in promoting trade-led growth, economic development, and macroeconomic stability. The Bank views its governance framework, financial transparency, and deep integration with member states not as vulnerabilities, but as assets that have enabled it to operate securely in a complex environment.

The negative outlook by Fitch, while notable, does not undermine Afreximbank’s operational credibility. The Bank’s management believes that the institution’s strong balance sheet, fortified by capital buffers and risk mitigation strategies, positions it well to weather temporary economic shocks in the region.

A call for deeper understanding

The Fitch decision has inadvertently spotlighted a broader debate about how multilateral development finance institutions operating under treaty law should be evaluated. Afreximbank’s position is that risk assessments must take into account not just financial data but also the institutional frameworks and legal covenants that define its operating landscape.

As African economies continue to navigate post-pandemic recovery challenges, Afreximbank sees itself as a vital instrument in ensuring financial stability and promoting sustainable development. While it acknowledges the role of credit rating agencies in fostering market discipline, it urges a more nuanced understanding of institutions like itself—whose mandates, legal structures, and risk profiles are unlike those of commercial entities.

In this light, the Fitch call becomes more than just a technical ratings update—it is a test of the global financial community’s grasp of African treaty-based institutions and their evolving role in global development finance.

Read also: AU unit claims Afreximbank’s downgrade by Fitch Ratings ‘not based on reality’