Africa’s high borrowing costs stem from weak data

Africa’s borrowing costs remain disproportionately high, not just because of flawed credit rating models but also because governments across the continent often lack the tools to engage effectively with the rating process. This assessment comes from Raymond Gilpin, chief economist at the United Nations Development Programme’s regional bureau for Africa. According to him, discussions about credit ratings have focused too narrowly on methodology while overlooking a more fundamental issue: the readiness of African officials to work with credit ratings.

The issue begins with the “big three” international agencies—Fitch, Moody’s, and S&P, whose methods critics argue fail to reflect Africa’s unique economic conditions. The newly established Africa Credit Rating Agency (AfCRA), launched in Mauritius this October, seeks to address this by using assessments tailored to the continent’s context. Gilpin, however, argues that the core challenge lies in how African governments prepare for ratings in the first place.

“The fact that the market prices risk on the African continent at a really high level is costing Africa a lot. But the root cause of this problem is at times misdiagnosed,” he says. “It is not always the methodology that is the problem. At times it is the data that is either not properly analysed, collected or coordinated in a way that tells the story of the future capacity of the economy to bear debt and repay,” he adds. He highlights persistent gaps in how governments collect, analyze, and coordinate economic data to demonstrate their ability to repay debt. Without this foundation, even the most refined methodology cannot overcome perceptions of risk.

UNDP trains officials to improve debt data

The UNDP has expanded its Africa Credit Ratings Initiative (ACRI) to address these gaps, offering training for officials across the continent. Over the past 18 months, the program has trained over 400 professionals from 23 countries through workshops covering agency methodologies and data requirements. An online course, developed with the UN System Staff College, provides a foundational understanding of sovereign credit ratings. Three cohorts have already completed the program, with plans to expand enrollment.

A second pillar of the initiative involves exposing policymakers to successful case studies. Through executive study tours, African officials visit countries that have improved their credit standing, such as the Philippines, which moved from non-investment-grade to investment-grade status through a coordinated, government-wide strategy. A recent tour included 22 officials from 11 African countries, who observed how ministries and agencies collaborated over years to strengthen the factors assessed by ratings agencies.

Gilpin describes the Philippines visit as transformative. “That was a real revelation for the African countries because they saw not just the strategy but the commitment and the political will necessary to sustain that,” he said. The UNDP plans additional tours next year, emphasizing that learning from peers in the global south is more effective than relying on distant markets.

AfCRA’s role in unrated African economies

The third component is a practical handbook for African officials, developed with input from advisers experienced at global credit rating agencies. Unlike standard reports, this guide serves as a working tool, covering every stage of the ratings process in both English and French. “We think it is really helpful because there’s nothing like this before. It’s not a report but a practical workbook that people can use.” Gilpin: How AfCRA can differentiate itself. For AfCRA to be transformative, Gilpin argues that it must prioritise coverage of economies on the continent not currently rated by international agencies. “There are 19 African countries that are not rated.

A number of them are beginning to express an interest in being rated because concessional money for development is drying up.” He notes that UNDP has been approached by Sierra Leone and Liberia to help prepare them for ratings. “To be able to issue bonds in international markets you need to have a credit rating, so they are getting ready.” Beyond sovereign ratings, Gilpin believes AfCRA’s longer-term value will be measured by its ability to deepen African capital markets and attract greater participation from the continent’s institutional investors, many of whom continue to deploy significant portions of their capital outside Africa. “There is a huge opportunity here,” he says, emphasising that domestic resource mobilisation will help African economies reduce foreign exchange risk.