Country risk isn't reflected in receipts, rents, or wages, yet it influences a large part of economic life. It refers to how investors, banks, and markets assess a country's stability. Fiscal situation, debt, political climate, institutional quality, legal certainty, and monetary stability all factor into this assessment.

 

When a country is perceived as riskier, it has to borrow at higher rates. This increase in the cost of financing doesn't just affect the government. It ultimately impacts banks, businesses, and sometimes even households. Country risk thus acts as a kind of general surcharge that spreads throughout the entire economy.

 

The interest rate spreads observed on international markets clearly illustrate this phenomenon. In 2024 and 2025, several African countries saw their borrowing costs rise sharply following credit rating downgrades. Ghana, engaged in debt restructuring, was excluded from international markets for a long time. Kenya had to offer a yield above 9% to return to the Eurobond market in February 2024. Conversely, countries considered more stable borrow on more favorable terms.

 

In the WAEMU, country risk is also transmitted to the banking system. Local banks often hold a significant amount of government bonds. If a country's fiscal situation deteriorates, the perceived risk immediately increases for financial institutions exposed to this debt. Banks then become more cautious, reduce lending, and sometimes increase their collateral requirements.

 

Private companies are not immune. A company located in a country considered riskier will often borrow at a higher rate than a similar company situated in a more stable environment. Investors demand higher returns to compensate for political, fiscal, or regulatory uncertainties. This can lead to the postponement of certain projects, a slowdown in investments, or a reduction in competitiveness.

 

Country risk also influences foreign direct investment. A multinational corporation wishing to build a factory, finance a power plant, or open a subsidiary compares the conditions offered by several countries. If it considers an environment too unstable or unpredictable, it may decide to go elsewhere, even if the economic potential is real.

 

This dimension often remains largely invisible in public debate because it doesn't immediately translate into dramatic measures. Yet, it can have a lasting impact on growth. Improving budgetary credibility, the quality of public statistics, the legal framework, or institutional stability often leads to a significant reduction in financing costs.

 

Country risk is therefore not just a matter for rating agencies or financial markets. It determines a portion of the price of money throughout the economy. The higher it rises, the more expensive borrowing becomes for the government, for businesses, and sometimes even for households themselves.