African leaders endorse Ruto’s push for regional credit rating agency
President William Ruto, the champion of AU reforms, lamented that despite Africa’s natural wealth, credit agencies have issued 94 percent of downgrades in the past decade, granting investment-grade status to only two African nations.
African leaders have endorsed a plan to establish a homegrown credit rating agency in efforts to foster financial independence.
Meeting in Addis Ababa at the 38th Summit of the African Union, the Heads of State and government said the establishment of the African Credit Rating Agency (AfCRA) would help counter bias among the existing global credit ratings that have long hindered the continent’s economic growth.
Africa loses $75 billion in opportunities due to biased credit ratings, according to the Africa Peer Review Mechanism and the United Nations Development Programme (UNDP).
Kenya’s President William Ruto, the champion of AU reforms, lamented that despite Africa’s natural wealth, fertile land, large diaspora remittances, and vast carbon sinks, credit agencies have issued 94 percent of downgrades in the past decade, granting investment-grade status to only two African nations.
He said that the potential impact of the AfCRA would be profound, quoting research that shows that a one-level improvement in Africa’s average credit rating would unlock $15.5 billion in additional funding.
“This alone would outstrip Official Development Assistance by 12 percent and meet 80 percent of Africa’s infrastructure needs. The opportunity is within our grasp, and we must seize it,” President Ruto told the high-level Presidential Dialogue on the Establishment of the Africa Credit Rating Agency.
Other speakers were Presidents Abdelmadjid Tebboune of Algeria, who is also chairperson of the Africa Peer Review Forum of Heads of State and Government, Taye Selassie of Ethiopia and Hakainde Hichilema of Zambia, and African Union Commission Deputy Chairperson Monique Nsanzabaganwa.
As Africa pursues economic integration and resilience, AfCRA represents a significant step in affirming the continent’s position in global financial governance, the leaders said.
Currently under development, the agency is slated for official launch in June, as part of the broader AU programme aimed at financial integration and independence.
The objective of establishing an African credit rating agency is to “provide fair, transparent and development-focused credit ratings that reflect the realities and potential of African economies.”
Its primary aim is to “enhance transparency, reduce reliance on the three international credit rating agencies, and address the specific needs of African countries, institutions, and contexts.”
Designed to tackle concerns over bias, inaccuracies and high costs associated with international credit rating agencies when evaluating African nations, this agency, the leaders said, “will provide an opportunity for the continent to have a credit rating system that reflects Africa’s unique socioeconomic realities and fosters a fairer representation of its creditworthiness.”
In contrast to traditional rating agencies such as Moody’s, Fitch, or Standard and Poor’s, the AfCRA will focus exclusively on African economies, incorporating data and socioeconomic indicators specific to each region.
“The time has come to rewrite our history, reclaim our narrative, and charge the African Renaissance forward. Our urgent calling is to fulfil our duty to Africa’s people and ensure that our continent takes its rightful place in shaping global progress in its full capacity and potential,” President Ruto said.
Global credit rating agencies have not only dealt African a bad hand, “they have also deliberately failed Africa,” he said.
“They rely on flawed models, outdated assumptions, and systemic bias, painting an unfair picture of our economies and leading to distorted ratings, exaggerated risks, and unjustifiably high borrowing costs. These prejudiced assessments come at an enormous cost ,not just to Africa but to the world. They deter investment, distort global trade, and derail progress towards the Sustainable Development Goals. By misjudging Africa, these agencies deny opportunity to investors and economies and deprive nations of prosperity.”
“We must be bold and call this for what it is: A financial straitjacket imposed on Africa. A system that punishes our economies while rewarding others, even when the fundamentals are comparable if not better,” Dr Ruto added.
Africa, he noted, will no longer accept to be misjudged by scales that overlook its reality.
“An African credit rating agency is not just an alternative, it is an imperative. This agency must be globally credible and backed by rigorous, credible data and driven by high reporting standards from our own governments. But more importantly, it must reflect Africa’s reality correctly,” Dr Ruto said.
The leaders said AfCRA’s objective is “not to compete with or replace” the international credit rating agencies but rather to complement them by offering an alternative perspective.
“It will focus on filling gaps in data and analysis, addressing regional nuances, and promoting African financial integration. This will allow for a diversified view of creditworthiness and fosters collaboration for mutual benefit,” they said.
