The African Development Bank (AfDB) has announced a new initiative aimed at helping African countries enhance their sovereign credit ratings. AfDB President Sidi Ould Tah emphasized the importance of improving economic data quality and transparency during a speech at the S&P emerging markets conference in London.
Tah pointed out that gaps in data and market infrastructure contribute to perceptions of higher risk, which subsequently inflate borrowing costs for African nations. The initiative will be executed through the African Legal Support Facility, assisting governments in preparing for credit assessments and providing better information to ratings agencies.
Currently, only three out of Africa's 54 countries hold investment-grade ratings, highlighting a significant area for improvement. The AfDB's efforts aim to address the information gaps that affect how international credit rating agencies assess African economies.
In addition to the AfDB's initiative, African leaders are pursuing the establishment of a continent-wide credit rating agency to further tackle concerns regarding borrowing costs. Nigerian President Bola Tinubu has also advocated for an Africa-owned ratings agency to reflect the actual economic conditions of African nations.
Furthermore, the AfDB is working to strengthen local financing and capital markets across Africa, engaging with stakeholders to identify and overcome obstacles to the development of robust domestic financial markets. This dual approach aims to enhance both credit ratings and the capacity for local resource mobilization.