5th Ordinary Session of the Specialized Technical Committee on Finance, Monetary Affairs, Economic Planning and Integration.

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July 18, 2022 to July 22, 2022

“Improving Africa’s access to Capital: Debt Management and the Rising Influence of Credit Rating Agencies.”

18-22 July 2022, Lusaka, Zambia

1. Addressing the challenges of the rising debt problem in Africa.

In recent years, particularly since the 2007-08 Global Financial Crisis, and outbreak of the COVID pandemic, an increasing number of African economies are experiencing high levels of debt and debt burdens. African countries increased borrowing during the pandemic to finance immediate public health needs and to protect lives and livelihoods. The debt situation in Africa is now compounded by the Russia-Ukraine conflict, undermining the debt sustainability across African countries. As global interest rates rise to combat the rising inflation, African countries debt service payments are likely to rise, resulting in defaults. African governments have as a result been engaging major creditors for them to extend debt relief and debts restructuring. For instance, at the onset of the COVID-19 pandemic, the G20 introduced the Debt Service Suspension Initiative (DSSI), which took effect in May 2020 to postpone debt amounting to approximately USD 11.5 billion for qualifying low- and middle-income countries up to December 2021, with 32 of the 73 that were eligible being in Africa. Although the DSSI released some funding, it was not adequate to meet the financing needs of African countries due to the larger share of Africa’s sovereign debt owed to private creditors. The worsening debt situation coupled with an increasing appetite for non-concessional loans calls for the 2022 STC to deliberate on these matters as a matter of urgency.

Discussions on this sub-theme will focus on:

Evolution and State of Africa’s Debt;
Deliberate on emerging frameworks for debt restructurings and debt relief initiatives including write-off of the debt;
Exchange lessons on promoting transparency and accountability in debt management;
Deliberate on policy options and strategies for prudent debt management and debt sustainability;
Make concrete recommendations on policy, regulatory and institutional frameworks for establishing an African debt observatory; and
Agree on a Common African Position on worsening debt problem.

2. Rising influence of Credit Rating Agencies (CRAs)

Concerns over the rising influence of CRAs has been heightened by the increasing number of African countries approaching international capital markets to fund their development programs. Frequent downgrades arising from negative risk perceptions of African economies have led to high interest payments on borrowed and also reduced their access to international capital markets. Because many African economies lacked the financial and monetary chest power to assist vulnerable people and businesses major CRAs (including Moody’s Fitch, and S&P) were approached to offer ratings in order for the former to access international capital markets. Unfortunately, many African economies, it is argued, were unfairly rated, which they borrowed at high costs, which worsened the already high debt levels. This explains why African countries embraced a G20 initiative to delay debt service payments for low-income countries.

The 2019 STC for Finance, Monetary Affairs, Economic Planning and Integration held in Yaoundé, Cameroun, made several recommendations, including the urgent need to establish an African Credit Rating Agency and this important initiative is being driven by the APRM Secretariat, which is an organ of the African Union. More recently, H.E. President Macky Sally, and Chairperson of the African Union pronounced himself on the need to create a Pan-African Credit Rating Agency.

Discussion under this sub-theme will deliberate on the following issues:
Discuss the impact of the credit rating on Africa’s access to capital;
Review methodologies used for rating African economies;
Discuss the technical support needed by African governments on credit rating.
Share lessons on best to regulate and manage credit rating agencies (CRAs)
Dialogue on the need to establish a Pan-African Credit Rating Agency;
Make concrete recommendations on policy, regulatory and institutional frameworks establishment of the Pan-African Credit Rating Agency;
Provide guidance on concrete actions and recommendations to improve ratings of African economies.

3. Objectives and Expected Outcomes

The main objective of the 2022 STC on Finance, Economic Planning, Monetary Affairs and Integration is to deliberate on, among other things, issues relating to increased access to capital, rising debt, and increasing influence of credit rating agencies in Africa.

Specific objectives of the STC are:

• Ensure a continental agreement of policymakers on the strategies and key success factors needed to facilitate access to finance;

• Provide a platform for policymakers to articulate concrete proposals for debt
resolution in Africa and the nexus between governance and economic growth;
• Frame concrete policy options and actions for reducing the growing influence of credit rating agencies in Africa though an African-led solution; and

• Discuss and make policy recommendations on other important issues on the
agenda

4. Participation at the STC .

Participants from Ministries of Finance, Economic Planning, and Integration and Central Banks of AU Member States are expected to attend. Other participants will include experts and senior officials from the African Union Organs and Specialized Institutions and Agencies, Regional Economic Communities, African Capacity Building Foundation, African Development Bank, OECD Development Centre, United Nations Economic Commission for Africa, UN Agencies, International Monetary Fund, World Bank, other international and Regionals Institutions, other partners, Civil Society Organizations and Non-Governmental Organizations will attend.

5. Registration and Information

The 5^th Ordinary Specialized Technical Committee on Finance, Monetary Affairs, Economic Planning and Integration organizing Committee will ensure participants successfully and seamlessly register online for the meeting.

Registration is now open. Participants should use the links below to register.

https://zoom.us/meeting/register/tJIlcOyurTwrG92tblcYrANwcMkUgRI3PvAy

Experts Meeting – 18 to 21 July 2022

Ministerial Meeting – 21 to 22 July 2022

For more details, kindly contact:

Department of Economic Development, Trade, Tourism, Industry, and Minerals

Ms. Rumbidzai Manhando at ManhandoR@africa-union.org

Mrs. Yamrot Demtse Kifle at YamrotD@africa-union.org

Ms. Mandy Mauyakufa atMauyakufaM@africa-union.org

Ms. Meaza Tezeraat MeazaT@africa-union.org

Economic Development, Trade, Tourism, Industry, Mining (ETTIM)