Interest payment on debt costs Africa $75bn yearly, UN says

African governments pay an estimated $75 billion annually in excess interest because of persistent risk premiums, diverting scarce public resources from development priorities such as infrastructure, healthcare and education, the United Nations Economic Commission for Africa (ECA) has said.

The commission said the high cost of borrowing also makes it harder for African countries to attract investment, underscoring the need for credit ratings that better reflect the continent’s economic fundamentals and reform efforts.

The comments come amid longstanding concerns that sovereign credit assessments do not always adequately capture the realities of African economies, with implications for borrowing costs and investment flows.

The ECA said the newly launched Africa Credit Rating Agency (AfCRA) could help address the problem by bringing deeper knowledge of African economies, local institutions and ongoing reforms into credit assessments.

“Its proximity to the markets it rates, its knowledge of local institutions, and its understanding of reform programmes as they unfold, should be its comparative advantage,” the commission said.

Speaking at AfCRA’s launch in Mauritius, Claver Gatete, the UN under-secretary-general and ECA executive secretary, described the agency’s establishment as a milestone in Africa’s pursuit of greater fairness in the international financial system.

Gatete, who was represented at the event by Hanan Morsy, ECA deputy executive secretary and chief economist, said credit ratings influence not only borrowing costs but also governments’ policy decisions.

He cited the COVID-19 pandemic, when concerns about potential credit rating downgrades discouraged some eligible countries from seeking temporary debt-service relief under the G20 Debt Service Suspension Initiative.

“When governments hesitate to use an internationally agreed crisis-support mechanism because of possible rating consequences, it points to a need to reassess how such risks are evaluated,” Gatete said.

He stressed that the goal was not to secure preferential treatment for African countries but to ensure greater accuracy, transparency and context in assessing their creditworthiness.

However, he said a new African rating agency alone would not resolve the continent’s financing challenges. Governments must also strengthen macroeconomic management, mobilise domestic revenue, improve public financial management, maintain responsible fiscal policies and manage external balances carefully.

Reliable economic data and greater debt transparency are equally important, Gatete said, noting that credit ratings can only be as accurate as the information available to the agencies producing them.

“Strengthening national statistical systems and debt transparency is therefore not a technical detail; it is a direct investment in creditworthiness,” he said.

He also urged African governments to engage more consistently with rating agencies and investors through dedicated investor relations functions and regular, credible communication.

The ECA, working with the African Development Bank, the African Union and other partners, supports member states in strengthening their economies and improving creditworthiness, Gatete said.

The commission will continue to support efforts to improve debt data and fiscal management and deepen local-currency capital markets. It also expressed readiness to work with AfCRA where their respective expertise could reinforce African ownership and produce practical results.

Gatete cautioned, however, that AfCRA’s credibility would depend on the quality and independence of its assessments rather than the symbolism of its launch.

The agency, he said, must demonstrate its credibility through its work overtime.

If successful, AfCRA could help ensure that African economies are assessed using a fuller picture of their economic conditions, enabling countries to finance sustainable development while maintaining stability, resilience and national ownership.