A new institution, the Africa Credit Rating Agency, was launched this month in Mauritius with the aim of addressing concerns over the high borrowing costs faced by African governments. Established under a mandate from the African Union but designed to operate with independent governance, the agency seeks to provide more objective assessments of risks associated with African economies, according to AU Commission chair Mahmoud Ali Youssouf.

African nations have increasingly criticized global credit rating agencies for imposing what they describe as disproportionately harsh evaluations, which they argue contribute to elevated interest rates on sovereign debt. The extent to which these agencies are responsible remains a matter of debate, but there is broad agreement on the growing severity of the continent’s debt challenges.

Data from the United Nations Conference on Trade and Development (Unctad) shows that net interest payments consumed 15.7% of government revenues in sub-Saharan Africa last year—more than twice the average for developing countries excluding China. Analysis by the ONE campaign, based on World Bank data, indicates that average borrowing costs for African countries nearly doubled between 2020 and 2024. This increase has constrained public spending on critical sectors such as health and education, with interest payments now exceeding expenditures in these areas.

The situation has been exacerbated in 2026 by the ripple effects of the US-Iran conflict on global energy markets, contributing to further rises in borrowing costs amid overall increases in government bond yields. Additionally, reductions in foreign aid from developed nations—down by nearly 40% over the past two years—have added pressure to already strained government finances.

The debt issue is not unique to Africa. Unctad notes that average borrowing costs for developing countries generally remain more than twice the levels faced by wealthy nations.

Amid this context, a new approach was proposed last week in a joint paper by the Center for Global Development and the Rockefeller Foundation, advocating for a “growth and investment reset.” This blueprint targets developing countries with sustainable debt levels but facing acute liquidity constraints that hinder investment in future growth.

Key elements of the proposed framework include a substantial increase in support from the International Monetary Fund and World Bank, including credit guarantees to help countries refinance expensive debt at lower costs. Bilateral creditors, primarily governments from affluent countries and China, would agree to maintain their debt exposure, halting net outflows during the program period. The initiative emphasizes funding productive investments to foster long-term growth instead of temporary relief measures.

Governments participating in the program would be required to devise and commit to investment plans focused on projects with measurable outcomes, a strategy intended to boost private sector confidence rather than trigger cautionary signals typical of past debt relief efforts.

The initiative aims to shift the narrative around sovereign debt from one of crisis stigma toward recognition of ambitious growth and development plans. The UK government has previously expressed a desire to reform the sovereign debt system, with its upcoming G20 presidency in 2027 presenting an opportunity to advance these goals.

Meanwhile, developing countries are seeking to strengthen their collective position. This week, Bangkok hosted the first governing council meeting of the Borrowers Platform, a new United Nations-backed forum designed to facilitate knowledge sharing and amplify the voice of debtor nations in global financial discussions.

However, AU Commission chair Mahmoud Ali Youssouf cautioned that the new African rating agency alone is unlikely to substantially reduce capital costs in the near term. He called for comprehensive reforms of global financial markets, urging member states and financial institutions to take active roles in advocating for systemic changes.