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2021 AEC: How African countries can let credit ratings agencies upgrade them

10-déc-2021

Boosting your credit rating could be as simple as the SDGs, according to experts who shared the stage at the 2021 African Economic Conference.

“I urge a lot of African countries to make the structural reforms and continue to work towards achieving the Sustainable Development Goals (SDGs), because these are the factors that actually contribute to improving ratings upgrades,” said Weyinmi Omamuli, Senior Economist at the United Nations Development Programme. Reforms such as improving business environments, macroeconomic stability and human development, are key, she said.

Omamuli was speaking during a session titled, “Are bonds the right instrument for development financing?” She said African countries would do well to apply just half the reforms that development agencies are promoting. “If we record better indicators for achieving the SDGs, we can move forward and make a strong case for higher ratings in African countries,” said Omamuli.

Omamuli added that over the past decade $175 billion had been raised by countries on the continent, which would not have been achieved in the absence of credit ratings.

Soraya Diallo, Chief Executive Officer of Bloomfield Investment in Côte d’Ivoire, pointed out that African countries could comfortably implement ratings-friendly reforms that open up access to global markets. “If they have higher ratings, they will unlock funding for financing the huge development needs, especially infrastructural projects. No one other than African countries and governments can build these reforms,” added Diallo.

She said African countries could also implement debt reforms, enhance public fund management, and build cross-border markets for the entire continent. The panelists agreed that it was best to avoid short-term instruments to finance long-term developments, which will help avoid maturity mismatch, especially with project-based bonds.

Pundits also spoke of the need to leverage regional infrastructure development to reduce risk and support credit ratings. It was agreed that partnerships are vital to building capacity and addressing the perception of credit ratings on the continent. The panelists recommended that African countries work together with credit rating agencies in order to understand their internal mechanisms. They said more studies were required to help establish the key factors to effectively engage with credit rating agencies, and even actors in capital markets. This will help develop and strengthen capital markets and ensure that Africa is not priced out of the entire process.

The 2021 African Economic Conference brings together a wide range of stakeholders, including policymakers, development institutions, the private sector, and researchers, to discuss ways to sustainably grow the continent’s development funding sources. The conference is organised by the African Development Bank, the United Nations Development Programme, and the Economic Commission for Africa. This year’s event was held both virtually and in-person on the island of Sal in Cabo Verde.