Johannesburg: Sub-Saharan Africa’s major economies, including South Africa, Nigeria, and Kenya, are grappling with rising borrowing costs, according to a recent report by Moody’s Ratings. The agency highlighted that over the past five years, these countries have faced a significant increase in debt servicing expenses due to policy weaknesses, inflationary pressures, and challenging market conditions.

In South Africa, despite having deeper domestic capital markets and a relatively strong monetary policy framework, borrowing costs remain high compared to other emerging markets. Moody’s noted that fiscal constraints and elevated interest rates, aimed at attracting capital inflows, could restrict domestic investment and dampen economic growth.

Nigeria is experiencing similar challenges, with firms struggling to access affordable credit due to high inflation and low savings rates. This situation limits business expansion and slows economic development.

Kenya has increasingly relied on domestic borrowing to finance budget deficits, resulting in a significant portion of government revenue being spent on interest payments. The country’s shallow financial markets further restrict access to credit for businesses and contribute to high debt servicing costs.

Moody’s report emphasized that while loans from development partners at lower interest rates offer some relief, they are insufficient to fully offset the high costs associated with local and international capital markets. Interest spreads over U.S. Treasuries for Kenya and Nigeria remain around 500 basis points, underscoring the persistent financing challenges.

The agency stressed the need for substantial policy reforms to reduce borrowing costs, improve access to credit, and support sustainable economic growth in the region. Without meaningful changes, high financing costs could continue to hinder investment and development across Sub-Saharan Africa.