Africa may be losing nearly $75 billion each year as a result of elevated borrowing costs driven by perceived investment risk, according to a new analysis linked to the United Nations Development Programme (UNDP) and supported by African business research.
The study points to what is widely described as the “Africa risk premium”, the tendency for investors to demand higher returns when lending to African countries, often regardless of individual economic fundamentals. This premium, analysts say, continues to inflate the cost of capital across the continent.
Of Africa’s 53 countries, 33 are currently rated below investment grade by international credit rating agencies, limiting their access to affordable financing on global markets. Only two countries hold investment-grade status, underscoring the narrow pool of economies viewed as low-risk by investors.
Researchers argue that the resulting high interest payments drain resources that could otherwise be directed towards development priorities, including infrastructure, healthcare and education, and reinforce long-standing challenges to sustainable economic growth across the continent.
–ChannelAfrica–
