Unsolicited credit rating assessments: A key challenge to debt sustainability in Africa

The long-term decline in aid and the recent fall in investment flow to Africa has compounded the funding crisis on the continent as access to cheaper financing is curtailed by high cost of borrowing. For solutions, African governments are pushing for the reform of Global Financial Architecture to overcome multidimensional and recurring crises. The impact of credit ratings on the cost of development finance in Africa featured prominently during the 2023 Spring Meetings of the World Bank Group and the International Monetary Fund (IMF) in Washington D.C. One of the issues raised is that of unsolicited credit ratings assessments in Africa – which are issued without request or agreement with the rated sovereign or entity for which the rating agencies also do not receive compensation. These have not yet been accorded due attention; despite the challenges they pose on debt sustainability in Africa. Whilst unsolicited ratings are welcomed for limiting barriers to entry for emerging rating agencies and providing information to investors, they present a myriad of downside risks.