Biased Credit Ratings Cost Africa $75 Billion Annually, Experts Warn

Experts have sounded the alarm over the economic toll of biased credit ratings in Africa, revealing that the continent loses approximately $75 billion annually as a result of inflated borrowing costs and restricted access to development financing. The concern was raised during a two-day high-level conference in Dakar, Senegal, which gathered senior policymakers, economists, and financial experts from across Africa to discuss the continent’s financial sovereignty.

The event, jointly organized by AfriCatalyst, the South African Institute of International Affairs (SAIIA), the United Nations Development Programme (UNDP), and the African Union Development Agency–NEPAD (AUDA-NEPAD), focused on boosting Africa’s influence in global financial and climate governance. One of the major highlights was the presentation of the Africa Credit Ratings Initiative (ACRI)—a framework designed to reduce Africa’s dependency on Western rating agencies that experts say often overstate risks, resulting in higher interest payments and reduced investment inflows.

According to estimates discussed at the conference, Africa loses nearly $74.5 billion each year to such distortions. This, experts said, undermines social and infrastructure development, weakens fiscal stability, and contributes to a growing debt burden. Dr. Bartholomew Armah, Chief Economist at AUDA-NEPAD, revealed that Africa’s external debt reached $863 billion in 2023, representing 169% of total exports. He warned that high bond yields—averaging 9.8%—have driven debt-service costs to 16% of export revenues, diverting critical funds from growth initiatives.

Similarly, Dr. Daouda Sembene, Chief Executive Officer of AfriCatalyst, described South Africa’s upcoming G20 presidency as a turning point for the continent. He emphasized that Africa must use this opportunity to amplify its voice in global financial reform discussions. “The voice of the Global South must be heard and prioritized,” Sembene said, urging collective action to reshape global financial rules that perpetuate inequality.

In her remarks, Ms. Catherine Phuong, UNDP Resident Representative in Senegal, called for “tangible policy outcomes” that translate commitments into real investments and measurable progress. Delegates concluded that with 25 African countries now facing high debt distress, the need for transparency, regional cooperation, and stronger African-led financial institutions has never been greater. The conference ended with a united call for “strategic coherence” to move beyond participation and toward true economic transformation for the continent.

Meanwhile, the African Credit Rating Agency (AfCRA)—a new Africa-led body under the African Union’s Peer Review Mechanism (APRM)—is expected to begin operations by late 2025, issuing its first sovereign rating by early 2026. Experts believe AfCRA will serve as a credible alternative to the global “big three” rating agencies—Fitch, Moody’s, and S&P—and help Africa rewrite its financial narrative.

source: nairametrics