Pathways to tackling Africa’s debt crisis through improved credit ratings

Sovereign credit ratings play a crucial role in determining access to affordable financing. The cost and volume of foreign borrowing largely depend on sovereign credit ratings. These ratings invariably contain some subjectivity, as identified in a previous report by the Africa Growth Initiative (AGI) at Brookings, “The ruinous price for Africa of pernicious ‘perception premiums’” and a more recent study by the United Nations Development Programme (UNDP) “Lowering the Cost of Borrowing in Africa: The Role of Sovereign Credit Ratings.”

Both studies revealed that African countries often face suboptimal ratings due to subjective assessments and limited institutional capacity to navigate the ratings process. To address these challenges, a new credit ratings initiative has been established to level the playing field by equipping countries with the tools and knowledge necessary to improve their ratings outcomes, and ensure more accurate assessments of their economic health.

On October 24, 2024, the Brookings Africa Growth Initiative (AGI), in partnership with UNDP’s Africa Bureau, hosted a conversation to explore how improving sovereign credit ratings can ensure African nations access more affordable development financing.

Building on the momentum of the event in April 2023, this follow-up high-level conversation expanded the dialogue to focus on concrete actions and solutions that can improve Africa’s sovereign credit ratings. Additional collaborators for this year’s event included AfriCatalyst, the United Nations Economic Commission for Africa (UNECA), the African Centre for Economic Transformation (ACET), and the Glasgow Financial Alliance for Net Zero (GFANZ).

The event sought to:

• Catalyze a ministerial dialogue on the challenges African countries face in accessing affordable development financing, with a focus on the role of sovereign credit ratings;
• Generate ideas, recommendations, and innovative strategies to improve credit ratings outcomes for African countries, in order to reduce the cost of borrowing and increase SDG financing and impact;
• Promote collaboration between development partners, African governments, and multilateral institutions to scale the initiative on strengthening institutional capacities for credit ratings assessments.

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