IN FOCUS
OFQ : On the higher rates paid by African countries: Official creditors are not lending at full market price, so isn’t this comparing apples and pears? DC: It’s true that concessional loans aren’t market-priced. But credit ratings still shape access to those flows in other ways – particularly in co-financing arrangements, blended finance structures and in how market access is perceived during debt sustainability assessments. While the World Bank’s concessional terms are based on internal metrics, agencies’ ratings can inform broader perceptions of fiscal risk and creditworthiness. I’ve seen how poor ratings contribute to negative feedback loops that limit financing options and reduce flexibility. So while the pricing comparison isn’t direct, the systemic effects of rating quality still matter across both
OFQ : Developing country governments have ample opportunity to present their development strategies, while rating agencies have robust processes and tried and tested methods. Is it fair to depict the agencies’ processes as a black box? DC: It’s not that methodologies aren’t published – they are. The black box is what happens in the rating committee room. How are different factors weighted in practice? What drives the final scoring adjustments? For governments, that process can feel opaque. When rating decisions significantly affect borrowing costs, it is worth asking whether governments can see inside that process.
OFQ : If rating agencies were to set up an office in each country they rate, who would pay for this overhead? DC: I’m definitely not proposing offices in every country – that would be prohibitively expensive. What could work are targeted enhancements: rotating dialogues, regional technical exchanges or digital consultations embedded in existing technical assistance programs. These approaches cost far less than the economic impact of poorly calibrated ratings. When you consider that a one- notch rating improvement can save millions in borrowing costs, even modest investments in better engagement pay for themselves. The proposal is about practical tools that make existing government efforts more effective in credit markets.
commercial and official financing landscapes.
“When you consider that a one-notch rating improvement can save millions in borrowing costs, even modest investments in better engagement pay for themselves.”
Daniel Cash, Senior Fellow, United Nations University Centre for Policy Research
Photos: Vergani Fotografia/Shutterstock (left); Kehinde Olufemi Akinbo/Shutterstock (right)
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