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2021 AEC: Panelists urge African countries to improve economic reforms to achieve higher credit ratings

4 December, 2021
2021 AEC: Panelists urge African countries to improve economic reforms to achieve higher credit ratings

Panelists at the 2021 African Economic Conference (AEC) on Saturday urged African countries to work on structural reforms that will lead to higher credit ratings by agencies.

They were speaking at a session titled, “Are bonds the right instrument for development financing?” at the AEC  which is being held in a hybrid format, with key delegates gathering on the Cabo Verde island of Sal, as well as virtually.

“I urge a lot of African countries to make the structural reforms and continue to work towards achieving Sustainable Development Goals (SDGs), because these are the factors that actually contribute to improving ratings upgrades,” said Weyinmi Omamuli, Senior Economist at the UNDP. She added that reforms such as improving business environments, macroeconomic stability and human development, are key to enable African countries to achieve higher credit ratings.

Omamuli emphasized that there is a lot that African countries can do, if they follow just half of the reforms that the development agencies are pushing. “If we record better indicators for achieving the SDGs, we can move forward and make a strong case for higher ratings in African countries,” said Omamuli.

She pointed out that most African countries have low human development, especially when it comes to the education and health sectors, saying that these countries need to massively invest in those sectors.Omamuli added that over the past decade US$175 billion had been raised by countries on the continent, which is a lot of capital that would not have gone to these countries in the absence of credit ratings.

Soraya Diallo, Chief Executive Officer of Bloomfield Investment in Cote d’Ivoire pointed out that African countries have all that it takes to implement reforms to enable them to achieve higher credit ratings, and be able to access international markets. “If they have higher ratings, they will unlock funding for financing the huge development needs, especially infrastructural projects. No one other than African countries and governments can build these reforms,” added Soraya.

She said that African countries can also implement reforms in debt management, public management of funds, and also build cross border markets for the entire continent.

The panelists agreed that Africa needs to avoid using short-term instruments to finance long-term developments, which will help avoid maturity mismatch especially with project-based bonds. The panelists also spoke of the need to leverage regional infrastructure development to reduce risk and to support credit ratings. It was agreed that partnerships are very important not only in terms of capacity building but also in addressing the perception of credit rating on the continent. The panelists recommended African countries work together with credit rating agencies in order to understand their internal mechanisms, making sure the countries properly understand the relevant issues.

Panelists spoke of the need for African economies to achieve higher credit ratings by enhancing credit fundamentals. This can happen by improving doing business, improving governance structures and building human capital

Panelists suggested that more studies are required to help establish the key factors needed to effectively engage with credit rating agencies, and even actors in  capital markets. This will help develop and strengthen capital markets and ensure that Africa is not priced out of the entire process.

The 2021 African Economic Conference brings together a wide range of stakeholders, including policymakers, development institutions, the private sector, and researchers, to discuss ways to sustainably grow the continent’s development funding sources. The conference is organised by the African Development Bank, the United Nations Development Programme, and the Economic Commission for Africa.