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Is African Debt as Perilous as Foreign Lenders Assume?

African governments say no. “The perception of risk continues to be higher than the actual risk,” argued Senegal’s President Macky Sall, speaking as chair of the African Union (au), in a speech to the un last year. He pointed an accusing finger at the credit-rating agencies. So did Ghana’s finance minister, Ken Ofori-Atta, in the early months of the covid-19 pandemic, as funds dried up and downgrades loomed. Misheck Mutize, an economist studying the issue for the au, casts doubt on the rating agencies. When they look at Africa, they ignore good news and downgrade at the first sign of trouble, he reckons. A recent report by the UN Development Programme argues that Africa would save money if rating agencies were more “objective”. It compares the ratings assigned by the big three with country scores from Trading Economics, a data platform which uses a different economic model to assess risk and leaves little room for discretion. If ratings matched the Trading Economics scores, African governments could borrow more often and more cheaply: the cumulative value of these gains could be $75bn, the report estimates.