The United Nations Development Programme (UNDP) says it will work to improve the transparency of credit rating systems in order to reduce borrowing costs in Africa.
This was said by Dr Raymond Gilpin, Chief Economist, Africa Bureau, UNDP, New York, during a webinar at the United Nations University.
The webinar titled “Lowering the Cost of Borrowing in Africa,” was sponsored by UNDP.
The economist claims that in order for African governments and investors to understand credit rating procedures, the UNDP and its partners would try to make them more transparent.
Additionally, he declared that they will use standardised alternative ratings, because doing so would not be prudent.
FitchRatings, Moody’s, and Standard & Poor’s are the three main credit rating companies. According to Gilpin, the organisations were rating African nations using insufficient information.
In order to achieve the Sustainable Development Goals (SDGs) by 2030, the United Nations Economic Commission for Africa (UNECA) estimates that the continent will require annual investments of $1.3 trillion.
However, African countries cannot cover these investments with income from trade and grant aid and the continent is estimated to be short of $200 billion dollars each year to achieve the SDGs.
A country’s creditworthiness is also determined by the major credit rating agencies, each of which impacts how much interest a country pays on its loan and how much money flows into the borrowing country.
Gilpin claimed that while the majority of African nations knew how to interact with multilateral organizations like the International Monetary Fund, they were unaware of how to do so with credit rating agencies.
He claimed that the majority of them lacked technical knowledge and a thorough understanding of the procedure.
The UNDP representative also said the organisation would assist African countries with a data platform that had traditional and non-traditional data sources like the one used by trading economics.
The economist said assisting African countries with data and establishing a group of advisors were the immediate things the UNDP could do for now.
