AfDB to help African countries prepare for credit ratings, Sidi Ould Tah says
By Aboki Forex —
The African Development Bank will launch an initiative to help countries on the continent better prepare for credit ratings, President Sidi Ould Tah said on Thursday.
Tah spoke at the S&P emerging markets conference in London. The remarks were made on Oct 1. He said poor data and weak infrastructure are holding African countries back in global credit markets.
“What is missed in Africa is the data and the infrastructure…the opacity in some markets creates this notion of high risk, which leads to high cost of borrowing,” Tah said.
Why ratings matter
African leaders have long said that funding costs on the continent are unfairly high. The “big three” ratings agencies say their ratings follow the same formula across the world.
Tah said improving credit ratings was a common goal across the continent. Only 3 out of 54 nations are currently investment grade.
New support facility
The African Development Bank will soon launch an initiative via the African Legal Support Facility. The facility will help countries prepare for ratings through better data and more transparency.
The African Peer Review Mechanism, an African Union-backed initiative, plans to launch a continent-wide ratings agency this month. That agency also aims to tackle high borrowing costs.
Local financing push
The AfDB is also leading a continent-wide effort to enable more local financing. Tah said it has met a range of stakeholders including pension funds and banks to identify and address impediments to the development of strong capital markets and domestic resource mobilization.
For African governments and businesses, the push matters because borrowing costs are tied to ratings and perceived risk. Better data and deeper local capital markets could help countries make a stronger case to investors.