Africa’s Place in the Global Financial Order

A study reported that countries in three regions could not account for varying quantities of food aid:  North Africa, 3.8 percent; Sub-Saharan Africa, 4.0 percent; South America, 3.6 percent.         

The study reported that the missing food in the North African country was a ‘loss’, a ‘leakage’ for the South American one, and a ‘theft’ for the Sub-Saharan African one.   

Although the percentages were about the same, the analysts used benign words to describe the missing food in North Africa and South America – loss, leakage.  But for Sub-Saharan Africa, the language was damning – theft.   

The choice of the words ‘loss’, ‘leakage’ or ‘theft’ has consequences. 

Donors respond to such reports. 

To ensure that food aid is not stolen, donors create elaborate bureaucracies and collect the most personal information from recipients in Sub-Saharan Africa, but in North Africa and Latin America, the verification is cursory at best.  Food aid delivered to Sub-Saharan Africa is more costly to the donors and more intrusive to the recipients.    

This entrenched bias is not limited to food aid delivery.


African policy makers have long complained that, as in the study of food aid, country credit ratings and risk analyses are systematically unfair to Africa.  They magnify the negative and minimize the positive aspects of African economies.  This makes it hard to qualify for loans, sell bonds, attract investments or trade.    Africa pays a premium in high interest rates, and stunted development.  African policy makers blame the biases and prejudices of the risk analysts, the agencies.

Risk analysis requires in-depth knowledge of shifting political environments, the performance of the economy, debts owed, fiscal policy, enforcement of anti-corruption measures or theft of intellectual property, and climate change, among other factors.

Therefore, lenders and investors turn to specialists for advice on the risks of lending to, buying bonds issued by, or investing in a given country.    In this way, the ratings and risk assessments become the heartbeat of global transactions, presided over by agencies whose benign or damning words influence such critical aspects as interest rates, grace periods, or the prudence of restructuring debt. 

Hence, rankings and risks assessments are watched closely.  Sometimes they are contested.

For example, by most indicators, the global economy is recovering from the impact of COVID-19.  Investors and lenders have factored in the impact of the ongoing war in Ukraine. 



Yet, according to the African Peer Review Mechanism, this global upswing is not reflected in the current ratings of African economies. 

In the first half of 2023, five African economies were downgraded, thirteen received negative ratings and no African country was upgraded.   Leading rating agencies are quick to downgrade and slow to upgrade African economies. 

Nigeria and Kenya were downgraded by New York-based Moody’s.   Tunisia and Egypt were downgraded by Moody’s and by London-based Fitch.    Ghana was downgraded by Fitch. 

Moody’s projected that in the first half of 2023, the ratio of interest payments to general government revenue in Nigeria would rise by 50 percent, while the ratio of the general government debt to gross domestic product would rise by 45 percent. 

In rejecting the projections, Nigeria pointed out that its tax revenue to gross domestic product has almost doubled, the highest in 7 years. The capacity to pay has improved.  

Likewise, Kenya rejected Moody’s downgrade, pointing out that only weeks after the downgrade, the rates on all 5 of Kenya’s Eurobonds were between 1.1 percent and 5.5 percent.   In other words, the market was more upbeat on Kenya than Moody’s.

Way Forward

African countries will continue appealing for fairer treatment.  In addition, Africa should create its own credit rating agency comparable to, for example, Japan Credit Rating Agency, Ltd.    

And that is what the AU plans: to launch a new credit rating agency in 2024.    

The proposed agency will market its services on the continent.  Naturally, it will use conventional quantitative indicators to rate African economies.  But it will also add context for lenders, bond buyers and investors to consider.    

Over time, as the agency becomes part of the global architecture of financial transactions, this will improve the chances of African countries qualifying for loans, marketing bonds, attracting investments or trade.  

Like other recent steps launching the African Continental Free Trade Area, the Pan African Payment and Settlement System, gaining permanent membership in the G20 or African countries joining BRICS – the rating agency will strengthen Africa’s role in the global order.

Hopefully, African policy makers will support AU’s project to create an African rating agency.  Other countries or regions have taken this same path.

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