African policymakers and experts are calling for greater transparency and fairness in the assessment of sovereign risk by international rating agencies. They denounce opaque and inconsistent methodologies that are costing the continent dearly in terms of lost investments and high borrowing costs.

Context and Issues

The current rating system does not accurately reflect the economic fundamentals or the resilience of African economies. This penalizes African countries in international financial markets.

African sovereign debt is rising sharply, with a high risk of debt distress due to slow growth, capital outflows, and geopolitical tensions. This situation makes debt management more complex and transparency more crucial.

Opaque debt, particularly resource-backed loans or undisclosed loans:

• Complicates financial management
• Increases corruption risks
• Limits the sovereignty of borrowing countries

Initiatives and proposals for greater transparency

A workshop organized by the African Peer Review Mechanism (APRM) with the United Nations Economic Commission for Africa (ECA), UNDP Africa, and Africatalyst highlighted the need for better understanding and transparency of sovereign credit rating processes.

The Africa Debt Monitor (ADM), launched by CABRI, is a unique tool that collects data directly from African countries on sovereign debt, debt management policies, and institutional capacities. This database, controlled by the countries themselves, promotes transparency, accountability, and better debt risk management.

Creation of a Multilateral Legal Framework

The African Sovereign Debt Justice Network (AfSDJN) proposed concrete reforms in 2023. These include the creation of a multilateral legal framework for sovereign debt restructuring to ensure fairer negotiations with all creditors, public and private.

The African Development Bank warns of the 824 billion USD debt burden and calls for an end to opaque resource-backed loans.

Importance of Transparency

Transparency in debt management allows for timely detection of debt distress risks, proactive measures to manage fiscal pressures, and increased investor confidence. It also contributes to improved governance, reduced corruption, and greater government accountability in the management of public resources.