The United Nations Development Programme (UNDP) convened a closed-door roundtable on Governance and Sovereign Credit Ratings on 15 October 2025 in Washington D.C., in partnership with AfriCatalyst, the African Center for Economic Transformation, the African Peer Review Mechanism (APRM), UNECA, and the Center for Strategic and International Studies. The event was part of the UNDP Africa Credit Ratings Initiative, which has provided technical assistance and capacity-building support to African countries since July 2024, helping them navigate credit rating processes and expand fiscal space for development financing.
The roundtable focused on the central role of governance in assessing credit risk across Africa. Participants included representatives from the major global credit rating agencies, African governments, development partners, and NGOs. The discussions emphasized the challenges of accurately accounting for governance in sovereign credit ratings and explored solutions to make ratings more reflective of African realities while increasing government engagement.
During the first session, experts analyzed perspectives from rating agencies and African policymakers on risk perception. Rating agencies primarily assess the capacity of borrowers to repay using indicators such as GDP per capita, revenue ratios, foreign exchange reserves, and governance scores. While governance failures account for 25% of sovereign defaults, the indicators often reflect differences between developed and developing countries rather than absolute governance weaknesses. Subjectivity in perception-based surveys and data limitations also affect ratings, highlighting the need for African countries to provide timely, comprehensive, and high-quality data to improve assessments. The session also stressed the potential of regional credit rating agencies to offer granular insights that complement global agencies’ evaluations.
The second session examined how rating agencies incorporate governance into their methodologies. Agencies evaluate policy predictability, financial track records, debt management effectiveness, central bank independence, transparency, and fiscal sustainability. Indicators such as the World Governance Indicators assess broader governance issues, including political stability, regulatory quality, rule of law, and corruption control, although these extend beyond the strict mandate of assessing financial risk. Participants noted the importance of communicating reforms, engaging proactively with agencies, and leveraging strong civil society and judicial systems to improve ratings.
Best practices identified included robust two-way communication with credit rating agencies, timely and comprehensive fiscal and macroeconomic data, documentation of reforms and positive corporate-government interactions, and strengthening legislative and executive institutions. The discussions also highlighted that ratings are just one input into investment decisions, with recent upward trends in Africa, such as Morocco’s investment-grade upgrade, illustrating the positive impact of policy predictability and governance improvements.
In conclusion, the roundtable underscored that governance and institutional quality are crucial determinants of creditworthiness, yet available indicators remain imperfect and data gaps persist. Collaboration among African governments, global and regional rating agencies, and development partners is essential to improve data quality, enhance transparency, strengthen institutional capacity, and ultimately ensure that sovereign credit ratings more accurately reflect the realities of African countries.
