Over the past two decades, African governments have turned to issuing sovereign bonds – both in domestic currency and Eurobonds – to procure funds for infrastructure development, aiming to reduce dependence on diminishing international aid. Although sovereign bonds provide a stable financing avenue devoid of preconditions akin to multilateral concessional funding, their repayment terms are contingent upon global credit ratings, which prescribe the conditions for accessing debt markets. Consequently, African nations are finding themselves burdened with interest payments eight times higher than their European counterparts and four times greater than the United States.

Efforts to mitigate the impact of credit ratings have resulted in a noteworthy rise in the number of African countries subjected to evaluation by the “Big Three” credit rating agencies globally, including Moody’s, Fitch, and Standard & Poor (S&P). As of 2023, 32 countries had been assessed and given a rating, compared to only 10 in 2003. Despite this progress, there remains a significant subjectivity in the risk perception assigned to African countries.

From January to June 2023, there were 13 ratings downgrades assigned to 11 countries.

Furthermore, a UNDP report launched during the World Bank Group-International Monetary Fund Spring Meeting in Washington, D.C. in April 2023, estimated the impact of biased credit ratings on African countries at $74.5 billion. Concurrently, Africa’s debt profile has surged by 183% since the beginning of the new millennium, a rate nearly four times higher than its gross domestic product growth rate.

Interest payments now constitute the highest and fastest growing portion of expenditure for many African economies, coinciding with the downgrading of African countries’ sovereign credit ratings.