Fitch Ratings has assigned the OPEC Fund for International Development (OPEC Fund) an inaugural credit rating of AA+, with stable outlook and a Short-Term IDR of ‘F1+’, as the Vienna-based institution prepares to launch itself into the international capital markets.
To date, OPEC Fund’s sole funding source has been capital replenishment contributions from member states (MS). However, …..OPEC Fund is taking steps to diversify its funding profile and borrowing instruments and it expects to issue approximately USD1 billion by end-2022.
Fitch cited the OPEC Fund’s “excellent” capitalization, liquidity levels and asset quality as key rating strengths, primarily driven by the agency’s expectation that the fund’s equity/assets ratio will continue to far exceed the 25% “excellent” threshold over the medium term.
The OPEC Fund’s “low risk profile” reflecting a well-diversified lending book, its strength of preferred-creditor status (PCS), “strong” risk management policies and “very high” level of management expertise further supported Fitch’s assessment.
The fund’s five-largest sovereign exposures (Egypt, Morocco, Bangladesh, Pakistan, Bosnia) account for 19.4% of total banking exposure. Fitch expects that OPEC Fund’s top-five exposures will continue to represent below 20% of the institution’s total banking exposure by 2023, particularly in light of the expansion of the fund’s operations over the medium term.
OPEC Fund Director-General Abdulhamid Alkhalifa welcomed the Fitch ratings announcement, which pays testament to the OPEC Fund’s 45 year track record of delivering successful development outcomes in line with the organization’s unique South-South mandate.
“This positive outcome comes at a time when innovative and concerted approaches to global development financing are especially required. The unwavering support of our member countries over 45+ years has consistently enabled us to meet the evolving needs of our partner countries. Thanks to this assessment, the OPEC Fund is even better positioned to advance the global Sustainable Development Goals (SDGs), and provide efficient and long-term development support to the millions of people currently in need of positive solutions” Alkhalifa said.
OPEC Fund, founded in 1976 by the member countries of OPEC, is a multilateral development bank (MDB) with a global mandate to provide both sovereign and non-sovereign financing to non-member countries.
It focuses on financing projects that meet essential needs, such as food, energy, infrastructure, employment (particularly relating to MSMEs), clean water and sanitation, healthcare and education. To date, the OPEC Fund has committed more than US$22 billion to development projects in over 125 countries with an estimated total project cost of US$187 billion.
On 1 January 2020, OPEC Fund established a special fund (SCR) to focus on sovereign lending to the least-developed countries in the world. The SCR is a legally independent fund from OPEC Fund’s ordinary capital resources (OCR),
OPEC Fund’s key shareholders are Saudi Arabia (34.1% of paid-in capital), Venezuela 13.5%) and Kuwait (12.3%).
The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, created in 1960. It aims to coordinate the petroleum policies of its member countries and determine the best means of securing stable oil supplies.
Founded in 1914 in New York, Fitch is one of the top three credit rating agencies internationally, along with Moody’s and Standard & Poor’s., Investors use the ratings of Fitch to refer to investments that are not going default and yield a good return.
With operations in more than 30 countries, Fitch Group is comprised of: Fitch Ratings, a global leader in credit ratings and research; Fitch Solutions, an authority in credit and macro intelligence providing fixed-income products and services to the global financial community; and Fitch Learning, a preeminent source of training and professional development.
