Africa’s development finance challenge has reached a critical point. Mounting debt pressure is squeezing fiscal space. And essential needs in infrastructure, health and education remain unmet. The continent’s governments urgently need affordable access to international capital markets. Yet many continue to face borrowing costs that make development finance unviable.
Sovereign credit ratings – the assessments that determine how financial markets price a country’s risk – play a central role in this dynamic. These judgements about a government’s ability and willingness to repay debt are made by just three main agencies – S&P Global, Moody’s and Fitch. The grades they assign, ranging from investment grade to speculative or default, directly influence the interest rates governments pay when they borrow.
Within this system, the stakes for African economies are extremely high. Borrowing costs rise sharply once countries fall below investment grade. And when debt service consumes large shares of budgets, less remains for schools, hospitals or climate adaptation. Many institutional investors also operate under mandates restricting them to investment-grade bonds.
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