I first came across the UNCTAD policy review “Credit rating agencies, developing countries and bias” last May. Its conclusions immediately stood out for their relevance to Africa’s economic trajectory.
Sovereign credit ratings play a pivotal role in determining how and at what cost nations can borrow. For African economies, the stakes are particularly high, making the sovereign credit ratings developing countries bias debate more than an academic issue—it is a matter of fiscal resilience and development potential.
The report lays bare a striking disparity. By the end of 2023, only 24% of developing countries held investment-grade ratings, compared to 79% of developed ones. In practice, this often translates into African countries paying a premium even when their macroeconomic fundamentals match those of higher-rated peers.
UNCTAD’s data shows yield spreads running an average of 77 basis points higher for developing nations with similar ratings—an added cost that directly affects budget priorities and growth.
While some of this gap reflects genuine risk, UNCTAD finds that subjective judgment leaves space for bias. This “Africa premium” has been a familiar grievance among policymakers across the continent. In my view, it perpetuates a cycle where higher borrowing costs limit fiscal flexibility, making debt sustainability harder to achieve and ratings harder to improve.
The review’s recommendations are clear, and I believe they are aligned with Africa’s needs. First, providing technical assistance to unrated countries can strengthen debt management, data quality, and financial transparency. Such improvements would not only support fairer ratings but also enhance investor confidence. From my perspective, the ability to present timely, accurate, and comprehensive information is one of the most effective tools African governments have to influence perceptions.
Second, UNCTAD calls for reducing market overreliance on ratings in regulation. Treating them as informed opinions rather than binding verdicts could prevent sudden capital flow reversals triggered by a downgrade. This approach would give markets more room to assess fundamentals instead of reacting mechanically to ratings changes.
The African Union’s plan for a regional Africa Credit Rating Agency (AfCRA) reflects a similar goal: offering assessments rooted in local realities. I see merit in this, provided AfCRA is governed with the rigour, independence, and transparency necessary to win the trust of global investors. A credible African rating institution could challenge entrenched narratives while complementing international benchmarks.
Still, rating reform alone will not close the gap. In my opinion, Africa must also take charge of what is within its control—strengthening macroeconomic stability, improving fiscal credibility, and enhancing institutional governance. These factors influence investor sentiment as much as, if not more than, the methodologies of rating agencies.
Transparency is key. Publishing comprehensive debt data, adhering to clear monetary policy frameworks, and maintaining credible budgets will give markets fewer reasons to discount African creditworthiness. It is not about bending to external judgment; it is about building a track record that commands fair treatment.
Equally, partners such as multilateral lenders and development agencies can play a role. Targeted support for policy modernisation, capacity building, and institutional reform would reinforce Africa’s position in the global financial system. Such investments offer long-term dividends—improved access to capital, reduced spreads, and more sustainable debt dynamics.
The UNCTAD policy review captures a truth that many in African finance circles have long understood: bias exists, and it costs us. But it also shows that change is possible. With strategic reforms, credible institutions, and targeted regional initiatives, Africa can shift the narrative and secure fairer access to finance.
The challenge is substantial, yet the opportunity is greater. Addressing sovereign credit ratings developing countries’ bias is not merely a question of fairness; it is about unlocking the continent’s growth potential on its own terms. Africa has the resources, the talent, and the resilience. What is required now is the determination to act and the insistence on being judged by evidence, not outdated perceptions.
You can download the full report here
