The Debt Trap: How Sub-Saharan Africa’s Economic Hopes Were Dashed

In 2002, African nations were optimistic about economic growth with global commodity demand rising and debt forgiveness from wealthy nations. The UN, backed by the US, initiated sovereign credit ratings to attract international investors. However, the expected economic boom never materialized. Instead, many African countries are now trapped in unsustainable debt which has hindered development in key areas like infrastructure, education, and healthcare.

In 2002, Africa appeared set for economic growth. Wealthy nations forgave billions in debt for sub-Saharan countries, and the UN pushed for sovereign credit ratings, enabling these nations to access the global bond market.

However, the anticipated boom faded into a debt crisis. U.S.-based credit rating agencies assigned low ratings, compelling African nations to pay high interest rates. Over two decades, more than a dozen sub-Saharan countries borrowed nearly $200 billion from bond investors, worsening their financial woes.

Investigations reveal that the rating agencies weren't prepared for the region's poverty challenges and that many African countries were unready for the inflow of capital. Today, African countries struggle with debt and low development rates, prompting widespread criticism of the credit rating agencies.

(With inputs from agencies.)