S&P upgrades Togo’s sovereign credit rating to B+, outlook stable

S&P Global Ratings has recently announced an upgrade in Togo's long-term local and foreign currency sovereign credit ratings to B+, with a stable outlook. This move comes as a testament to the resilience and growth potential of the Togolese economy despite facing headwinds to global growth. The ratings firm expects Togo's GDP to continue growing at an average rate of 6 percent over the years 2025 to 2028, signaling positive prospects for the country's economic future. The decision to upgrade Togo's credit rating was based on three main pillars, as explained by Hugo Soubrier, Lead Analyst for Togo at S&P. Firstly, the resiliency of the Togolese economy stood out, with the country showcasing remarkable growth even amidst external shocks such as the pandemic in 2020 and conflicts in Ukraine. Togo's average GDP growth rate exceeded 6 percent between 2021 and 2023, setting a positive trajectory for the years ahead. Factors contributing to this trend include a decline in inflation, which is expected to bolster household consumption, and ongoing reforms by the government, including the LIFT investment initiative. Secondly, fiscal consolidation at the government level played a significant role in the ratings upgrade. The government's efforts led to a drop in the deficit below 3 percent starting in 2026, signaling a positive trend towards financial stability. Additionally, external diversification of the economy helped reduce balance of payment risks, further supporting the credit rating upgrade. The third pillar highlighted Togo's competitive advantage as a transportation hub in the region. Despite challenges and tensions in neighboring countries, Togo's strategic location and mediation role have enhanced its position as a key transportation hub, attracting trade flows and boosting its economic prospects. Looking towards the future, S&P expects private investment in Togo to increase, driven by the country's competitive advantages such as the Port of Lome's natural deep-sea water and ongoing efforts to diversify the economy through initiatives like the industrial zone of Adetikope. While Togo currently attracts less Foreign Direct Investment (FDI) compared to other countries in the region, the trend is expected to improve by 2028. In terms of tax collection strategies, the Togolese government aims to raise tax revenue by 0.5% of GDP through 2028, with measures in place to enhance efficiency and broaden the tax base. Despite having one of the highest tax burdens in the sub-region, Togo's focus on digitalizing customs and improving tax collection processes is projected to yield positive results. Moreover, S&P's assessment of Togo's exchange rate and trading partners within the WAEMU region remains favorable, with the euro's appreciation benefiting the country's debt burden due to significant portions of debt denominated in non-euro or non-CFA franc currencies. As Togo navigates the path towards sustained growth and fiscal stability, the outlook appears promising, underpinned by ongoing reforms, investment incentives, and strategic economic positioning. In conclusion, Togo's recent sovereign credit rating upgrade underscores the country's resilience, growth potential, and attractiveness to investors. With a stable outlook and a focus on sustainability, Togo is poised to capitalize on its strengths and overcome challenges to achieve sustainable economic growth and development.