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A comparative study of economic growth as a key determinant of sovereign credit ratings in Africa

Misheck Mutize (Graduate School of Business, University of Cape Town, Cape Town, South Africa)
McBride Peter Nkhalamba (Thematic Research Division, African Peer Review Mechanism, Midrand, South Africa)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 13 May 2020

Issue publication date: 22 June 2021




This study is a comparative analysis of the magnitude of economic growth as a key determinant of long-term foreign currency sovereign credit ratings in 30 countries in Africa, Europe, Asia and Latin America from 2010 to 2018.


The analysis applies the fixed effects (FE) and random effects (RE) panel least squares (PLS) models.


The authors find that the magnitude economic coefficients are marginally small for African countries compared to other developing countries in Asia, Europe and Latin America. Results of the probit and logit binary estimation models show positive coefficients for economic growth sub-factors for non-African countries (developing and developed) compared to negative coefficients for African countries.

Practical implications

These findings mean that, an increase in economic growth in Africa does not significantly increase the likelihood that sovereign credit ratings will be upgraded. This implies that there is lack of uniformity in the application of the economic growth determinant despite the claims of a consistent framework by rating agencies. Thus, macroeconomic factors are relatively less important in determining country's risk profile in Africa than in other developing and developed countries.


First, studies that investigate the accuracy of sovereign credit rating indicators and risk factors in Africa are rare. This study is a key literature at the time when the majority of African countries are exploring the window of sovereign bonds as an alternative funding model to the traditional concessionary borrowings from multilateral institutions. On the other hand, the persistent poor rating is driving the cost of sovereign bonds to unreasonably high levels, invariably threatening their hopes of diversifying funding options. Second, there is criticism that the rating assessments of the credit rating agencies are biased in favour of developed countries and there is a gap in literature on studies that explore the whether the credit rating agencies are biased against African countries. This paper thus explores the rationale behind the African Union Decision Assembly/AU/Dec.631 (XXVIII) adopted by the 28th Ordinary Session of the African Union held in Addis Ababa, Ethiopia in January 2017 (African Union, 2017), directing its specialized governance agency, the African Peer Review Mechanism (APRM), to provide support to its Member States in the field of international credit rating agencies. The Assembly of African Heads of State and Government highlight that African countries are facing the challenges of credit downgrades despite an average positive economic growth. Lastly, the paper makes contribution to the argument that the majority of African countries are unfairly rated by international credit rating agencies, raising a discussion of the possibility of establishing a Pan-African credit rating institution.



Mutize, M. and Nkhalamba, M.P. (2021), "A comparative study of economic growth as a key determinant of sovereign credit ratings in Africa", International Journal of Emerging Markets, Vol. 16 No. 4, pp. 786-805.



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