top of page

According to the Director of the ECA, borrowing cost must be affordable for African countries

Trained economist Hanan Morsy, who is the Director of the Macroeconomic Policy Division at the Economic Commission for Africa (ECA), asserted that borrowing costs for African countries must be affordable.

Indeed, the African continent is known to incur very high borrowing costs when international financial institutions such as the International Monetary Fund (IMF) loan funds to African countries at very high-interest rates. High borrowing costs can make it difficult for African countries to finance their development needs and can lead to debt crises.

Since 2022, the ECA has been coordinating the African High-Level Working Group on the Global Financial Architecture, bringing together finance, planning, and economic development Ministers alongside the African Union, African Development Bank, African Export-Import Bank, World Bank Group, and the IMF. The working group serves as a platform aimed at building consensus among African policymakers on key proposals for reforming the global financial architecture to reflect the changed times.

There are a number of factors that contribute to high borrowing costs for African countries. First, the perceived risk. Credit rating agencies often perceive African countries as being more risky investments than developed countries. This is due to a number of factors, including higher levels of poverty, inequality, and corruption. Second, small domestic markets. Indeed, many African countries have small domestic markets, which can make it difficult for them to raise capital domestically. And third, the limited access to international capital markets. As a matter of fact, many African countries have limited access to international capital markets, which can further restrict their ability to borrow money at affordable rates.

It is, however, very possible for African countries to improve their creditworthiness in order to have lower borrowing costs. African countries could improve their creditworthiness by implementing sound macroeconomic policies, reducing debt levels, and improving the business environment.

Secondly, the development of the financial sector is surely a must. Indeed, a well-developed financial sector can help to channel savings into investment and support economic growth.

Thirdly, it is crucial to deepen domestic capital markets. African countries can deepen their domestic capital markets by developing new financial products and instruments and by making it easier for investors to raise and invest capital.

Fourthly, it is essential to improve access to international capital markets. Certainly, African countries can improve their access to international capital markets by developing their stock exchanges and by issuing more sovereign bonds.

It is important to note that reducing borrowing costs takes time and effort. However, it is essential that African countries find ways to do so in order to finance their development needs and achieve sustainable economic growth.

In addition to the above, it is important for African countries to work together to negotiate better terms from lenders. This could involve establishing regional debt management institutions or issuing joint sovereign bonds. It is also important for African countries to diversify their sources of finance and to reduce their reliance on traditional lenders such as the World Bank and the International Monetary Fund.


Rated 0 out of 5 stars.
No ratings yet

Add a rating

Subscribe to The Lake Street Review!

Join our email list and get access to specials deals exclusive to our subscribers.

Thanks for submitting!

bottom of page