https://arab.news/bcjn8
Like many other multilateral forums, the upcoming Fourth International Conference on Financing for Development may well produce impressive declarations and laudable promises. But will lofty rhetoric be translated into concrete progress in lowering the structural and systemic barriers to financing development in Africa, including deteriorating debt sustainability, dwindling concessional finance and declining access to affordable capital?
Africa’s debt crisis did not emerge overnight. It is the result of years of chronic underfinancing, which forced countries to borrow for even the most basic investments. Between 2010 and 2021, the share of Africa’s public external debt owed to private creditors rose from 30 percent to more than 44 percent. And private loans mean very high interest rates, which run in the 7 percent to 10 percent range, on average, with some countries, such as Ghana and Zambia, facing rates above 12 percent.
The problem lies partly with credit ratings agencies, which tend to take a pro-cyclical approach, downgrading countries — and driving up borrowing costs — precisely when they are most vulnerable. Between 2021 and 2023, for example, Moody’s downgraded Ethiopia, Ghana and Tunisia to “deep junk” status, despite their fiscal consolidation efforts. Such decisions are not only opaque — they reflect external risk perceptions, rather than empirical criteria. According to the UN Development Programme, credit rating agencies’ inflated risk perceptions cost the 16 African countries that issued bonds an estimated $74.5 billion by 2020.
