IN FOCUS
The World Bank International Bank for Reconstruction and Development (IBRD) offers much lower interest rates than bond markets
9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Africa: Lower middle income
9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Africa: Upper middle income
Daniel Cash
Daniel Cash is a non-resident senior fellow at the United Nations University Centre for Policy Research (UNU-CPR), where he leads a dedicated
disclosure levels – to track desired outcomes. These might include changes in rating volatility, information symmetry, sovereign capacity to present reform narratives and development financing cost trends. Structured engagement is not a panacea. However, building fairer, more transparent relationships between governments and credit rating agencies today will strengthen the resilience of financial systems tomorrow, particularly across the Global South. By ensuring that sovereign narratives are properly contextualized, we can improve outcomes for all players in the sovereign debt ecosystem. It is a win-win scenario. effort to improve awareness and understanding of credit rating agencies in the context of the broader reform of the international financial architecture. He is an Associate Professor (Reader) at Aston University and holds a PhD in Banking, Corporate Finance and Securities Law from Durham University, UK. UNU-CPR UNU-CPR is a think tank within the United Nations that carries out policy-focused research and capacity-building on issues of strategic interest and importance to the UN and its Member States. The Centre prioritizes urgent policy needs requiring innovative, practical solutions oriented toward immediate implementation and sustainability over the long term.
Bondholders
World Bank–IBRD
Bondholders
World Bank–IBRD
Source: ONE Campaign
From theory to practice To be effective, these forums will have to avoid delaying rating timetables by operating on fixed annual schedules outside of rating cycles; focused agendas will ensure more efficient discussions. Similarly, duplication should be minimized, including by moving beyond bilateral engagements to thematic group learning, creating institutional memory among issuers. In the process, cost implications could initially be absorbed by MDBs, aligning with their mandates to enhance sovereign financial resilience. Steps should also be taken to limit unintended consequences. Sovereigns may fear their vulnerabilities could be exposed or taken out of context, while rating agencies may worry that participation could compromise their methodological neutrality (or the perception thereof). The proposed Charter would mitigate these risks by encouraging voluntary participation, ensuring confidentiality and explicitly preventing dialogue contents from directly influencing formal ratings. Sovereigns would retain control of their narratives, while agencies would maintain their analytic discretion. This approach – involving sovereign issuers, rating agencies and MDBs – would cover all angles and bring benefits to the entire ecosystem. Implementation
could, for example, begin with regional pilots clustering countries geographically (i.e. West, East and Southern Africa) and by themes, led by an organization such as the AfDB, followed by evaluation and potential expansion based on documented outcomes. Possible themes would include: How are fiscal reforms and diversification efforts weighted in ratings? How are investment pipeline risks assessed relative to debt burdens? And how are post-default recovery efforts and governance improvements evaluated? Groupings should reflect shared economic challenges and existing regional financial integration efforts. For example, commodity-related issues in West Africa, infrastructure- driven development challenges in East Africa, or debt distress issues in Southern Africa. Small clusters would ensure focused discussion, strengthen peer learning and foster trust among participants. Meanwhile, MDB patronage would provide neutrality and procedural rigor. As with any pilot, monitoring, impact assessment and learning would be critical to correct missteps, demonstrate effectiveness, inform policy and encourage replication. Forums could establish mechanisms – such as charting a post-forum rating outlook or an independent review of participants’
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