Experts have raised concerns that Africa loses approximately $75 billion annually due to biased credit ratings that inflate borrowing costs and limit development funding.
The warning was issued during a two-day high-level conference held in Dakar, Senegal, which brought together senior policymakers, economists, and financial experts from across the continent.
The conference, organised 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), explored ways to strengthen Africa’s influence in global financial and climate governance.
A major highlight was the presentation of the Africa Credit Ratings Initiative (ACRI) by UNDP and AfriCatalyst — a continental framework aimed at reducing Africa’s overdependence on foreign credit rating agencies, which experts say exaggerate financial risks, leading to higher interest payments and reduced investment inflows.
According to the estimates shared at the meeting, Africa loses $74.5 billion annually due to such distortions, which curtail funding for vital social and infrastructure projects and weaken fiscal stability.
Illicit financial flows and structural challenges
Dr. Bartholomew Armah, Chief Economist at AUDA-NEPAD, noted that Africa’s external debt reached $863 billion in 2023, representing 169% of total exports, with average bond yields at 9.8%. This, he said, has pushed debt-service costs to 16% of export revenues, diverting funds from development.
He emphasized the need for structural reforms and regional financing institutions to curb economic vulnerability:
“Addressing illicit financial flows, which cost the continent an estimated $88 billion annually, and establishing regional mechanisms like the African Monetary Fund and African Stability Mechanism, are crucial to restoring fiscal stability,” Armah said.
Similarly, Dr. Daouda Sembene, Chief Executive Officer of AfriCatalyst, described South Africa’s upcoming G20 presidency as a pivotal opportunity for Africa to ensure that its perspectives influence global economic decision-making.
“The voice of the Global South must be heard and prioritised,” Sembene said, stressing that African nations must work collectively to reform global financial rules that perpetuate inequality.
UNDP calls for tangible outcomes and policy alignment
Ms. Catherine Phuong, UNDP Resident Representative in Senegal, urged African leaders to ensure that policy commitments translate into real investments and measurable outcomes.
“Aligning incentives between policymakers, markets, and think tanks is critical to lowering Africa’s cost of capital,” she said.
Delegates agreed that debt distress is deepening across the continent, with 25 African countries now facing high debt risks — up from nine in 2012 — stifling investment in key sectors such as health, education, and climate adaptation.
The experts called for greater transparency in global financial governance, stronger coordination among African economies, and sustained advocacy to ensure reforms lead to inclusive and sustainable growth.
The conference concluded with a joint call for “strategic coherence and relevance” in Africa’s engagement with global platforms, moving beyond participation toward achieving tangible economic transformation.
What you should know
In June, Misheck Mutize, lead expert on credit rating agencies at the African Peer Review Mechanism (APRM), a structure under the African Union, had said a new Africa-led credit rating agency is set to begin operations by the end of September 2025.
- He said the aim is to offer an alternative to the global “big three” agencies, Fitch, Moody’s, and S&P.
- Known as the African Credit Rating Agency (AfCRA), the institution will issue its first sovereign rating by late 2025 or early 2026.
- AfCRA is currently in the final stages of selecting a Chief Executive Officer, with a shortlist already in place and an appointment expected in Q3.
The creation of AfCRA is a response to long-standing frustrations from African policymakers over how global agencies assess the continent’s credit risks.
