A conference organised by the Economic Commission for Africa in Botswana last year concluded that low credit ratings for African countries were leading to high borrowing costs and liquidity challenges.

The conversation revolved around harnessing sovereign credit rating power for Africa’s economic transformation.

According to Zuzana Schwidrowski, director of the ECA’s Macroeconomics, Finance and Governance division, the low credit ratings contribute to high borrowing costs and a vicious spiral of liquidity challenges as well as debt accumulation for African countries.

The overall double-digit inflation prevents African central banks from reducing policy rates, another factor behind high borrowing costs and overall subdued growth.

Sonia Essobmadje, the chief of ECA’s Innovative Finance and Capital Markets section, said that improving Africa’s fundamentals and implementing a structural reform programme would “certainly over time contribute to better ratings, but more importantly to sustainable, inclusive growth and the well-being of the population”.

The development of African national and regional financial markets, she advised, should be a priority, as this would reduce excessive dependence on external debt and improve the transmission of monetary policy.

Misheck Mutize, the lead expert on credit ratings at the African Union, cautioned that excessive reliance on credit ratings can amplify market instability and lead to pro-cyclicality.

Marcus Courage, CEO of Africa Practice, said recent analysis and data collected by his organisation and Africa No Filter indicates that stereotypical media narratives about Africa cost the continent $4.2 billion a year in inflated interest on sovereign debt due to poor coverage, often underpinned by conflict and war.

That is why we think President William Ruto’s call for reforms of international financing institutions, advocating for a more inclusive approach, is an important conversation.

Ruto, like other African leaders, has demanded the democratisation of the boards of multilateral development banks to ensure that all members have an equal say in the management of these institutions. There is a strong feeling that the current financial system is unfair and neglects the interests of developing countries.

For African nations to attain sustainable development and pull themselves out of poverty, there needs to be a deliberate debate on the global financing systems.