{"id":568199,"date":"2026-07-31T06:51:25","date_gmt":"2026-07-31T06:51:25","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/568199\/"},"modified":"2026-07-31T06:51:25","modified_gmt":"2026-07-31T06:51:25","slug":"super-el-nino-wont-sink-africas-ratings-unless-governments-overspend-sp-says","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/568199\/","title":{"rendered":"Super El Ni\u00f1o won’t sink Africa’s ratings unless governments overspend, S&P says"},"content":{"rendered":"


\n <\/a><\/p>\n

A potential super El Ni\u00f1o is unlikely on its own to trigger sovereign credit rating downgrades across Africa and other emerging markets unless governments\u2019 policy responses significantly weaken public finances, according to S&P Global Ratings.\n<\/p>\n

While severe droughts, floods and other extreme weather events could temporarily disrupt economic activity, sovereign ratings are designed to withstand short-term shocks, Joydeep Mukherji, S&P Global\u2019s lead sovereign ratings analyst for Latin America, said in an interview with CNBC Africa.\n<\/p>\n

\u201cIf it\u2019s a flooding or a drought that disrupts economic activity, you assume it\u2019s going to pick up in six months, 12 months. Ratings should be able to withstand that kind of stress, if that\u2019s all that happens,\u201d Mukherji said.\n<\/p>\n

Instead, he added, the bigger risk to sovereign creditworthiness lies in how governments respond to the economic fallout.\n<\/p>\n

Limited fiscal support for affected households and businesses would be manageable, but broader interventions\u2014such as large-scale subsidies, fuel price controls or electricity support measures\u2014could place additional strain on public finances and eventually weigh on sovereign ratings.<\/p>\n

\u201cIf there\u2019s just a small fiscal response to help people who are affected, that\u2019s one thing,\u201d Mukherji said. \u201cThen suddenly you have a fiscal problem on the side, not just the disruption caused by natural events.\u201d\n<\/p>\n

He said policymakers face a difficult trade-off between allowing households and businesses to absorb part of the economic shock or shifting more of the burden onto government balance sheets through higher spending, wider fiscal deficits and increased borrowing.\n<\/p>\n

\u201cPolicy response is key here. Do governments spare or share the costs, or do they take a lot of it onto themselves into their balance sheet through higher deficits, higher debt?\u201d he said. <\/p>\n

Mukherji also noted that countries with flexible exchange rate regimes are generally better positioned to absorb weather-related shocks than economies without independent currencies.\n<\/p>\n

He cited Colombia and Peru as examples where exchange rate flexibility provides an additional buffer against climate-related disruptions. By contrast, countries such as Ecuador, which uses the U.S. dollar as its official currency, have fewer policy tools available to restore competitiveness following major external shocks.<\/p>\n

Despite growing concern over the strength of the developing El Ni\u00f1o, S&P does not expect the weather phenomenon to trigger a broad wave of sovereign rating downgrades across emerging markets.\n<\/p>\n

The comments come as African governments and development institutions step up preparations for what forecasters warn could become a \u201csuper\u201d El Ni\u00f1o, bringing severe droughts, floods and extreme weather across parts of the continent, with significant implications for agriculture, infrastructure, food security and economic growth.\n<\/p>\n

On Monday, the African Development Bank warned that a severe El Ni\u00f1o could inflict economic losses of between $10 billion and $20 billion across affected African countries while triggering displacement and migration in some of the hardest-hit regions.\n<\/p>\n

\u201cJust this event is going to reduce heavily affected countries\u2019 GDP by one to two percent on average, which is about $10 billion to $20 billion across the continent,\u201d Anthony Nyong, director for Climate Change and Green Growth at AfDB said in an interview.\n<\/p>\n

The AfDB forecasts Africa\u2019s economy will expand by 4.2 percent this year before accelerating to 4.4 percent in 2027, assuming geopolitical tensions ease, although a severe El Ni\u00f1o could pose fresh downside risks for some of the continent\u2019s most climate-vulnerable economies.<\/p>\n

Bunmi Bailey<\/a> <\/p>\n

Bunmi holds a degree in Economics from the University of Lagos and has over eight years of experience in content writing and journalism.
\n
\nHer career spans roles as a financial and business journalist at BusinessDay Media and TechCabal, and as Head of Research at SBM Intelligence, an Africa-focused market intelligence and strategic consulting firm.
\n
\nShe also served as Editor at Finance in Africa, a subsidiary of Businessfront and is currently Assistant Editor, Finance (Africa), at BusinessDay. <\/p>\n

<\/p>\n

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