African union set to launch independent credit rating agency

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African union set to launch independent credit rating agency
African union set to launch independent credit rating agency

The African Union is making preparations to introduce a novel credit rating agency specifically tailored for the continent in the coming year.

This initiative aims to address concerns regarding the fairness of the current credit ratings assigned to African nations. An official, speaking to Reuters, disclosed this forthcoming development.

The proposed agency, to be headquartered within Africa, seeks to offer a fresh perspective on assessing the risks associated with lending to African countries.

Misheck Mutize, the lead expert for country support on rating agencies within the African Union, clarified that the primary goal of this agency is not to replace the existing major credit rating agencies but to diversify viewpoints.

AU aims to offer contextual info to aid investment

He explained that this new agency would provide investors with contextual information to aid their decisions when considering purchasing African bonds or extending private loans to African nations.

Mutize emphasized, “Our goal has not been to replace the big three…we need them to support access to international capital. Our view has been to widen the diversity of opinions.”

The African Union, in cooperation with member nations like Ghana, Senegal, and Zambia, contends that the major three credit rating agencies—Moody’s, Fitch, and S&P Global Ratings—have exhibited bias in their assessments of lending risks in African countries.

They argue that these agencies tend to downgrade African nations more swiftly, particularly during crises like the COVID-19 pandemic.

Nevertheless, the three major rating agencies have vehemently denied any bias and maintain that their rating methodologies are consistently applied across all regions.

As of now, Moody’s, Fitch, and S&P Global Ratings have not immediately responded to requests for comments on this issue.

Ravi Bhatia, the lead analyst for sovereign ratings at S&P, recently affirmed that the agency uniformly applies the same criteria across all continents.