Africa Heads of State Convene in Ethiopia to Counterbalance Perceived Biases of Major Rating Firms

President William Ruto has strongly criticized global credit rating agencies for their unfair assessment of African economies, calling for the establishment of an independent Africa Credit Rating Agency.

Speaking at the 37th African Union (AU) Ordinary Summit in Addis Ababa, Ethiopia, Ruto said there’s need the need for a dedicated continental rating agency to ensure fair and accurate evaluations of African nations.

The summit, which convened Heads of State and Government, policymakers, financial experts, and development partners, focused on addressing financial disparities and operationalizing a regional credit rating agency to counterbalance the perceived biases of major global firms.

Flawed Models and Systemic Bias

President Ruto asserted that global rating agencies rely on flawed models, outdated assumptions, and systemic biases, painting an inaccurate picture of African economies. These distortions, he argued, lead to exaggerated risk perceptions and higher borrowing costs, hindering economic growth and development.

“Africa will no longer accept to be misjudged by the scales of global credit rating agencies that overlook our reality,” Ruto stated. He further stressed that the misrepresentation of African economies has deprived nations of investment opportunities and prosperity.

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The Economic Cost of Biased Credit Ratings

According to a study by the African Peer Review Mechanism (APRM) and the United Nations Development Program (UNDP), biased credit ratings have resulted in an estimated $75 billion in lost opportunities for African economies.

And despite Africa’s vast natural wealth, fertile land, and significant diaspora remittances, Ruto said the continent remains disproportionately affected by negative ratings.

“In a continent abundant in natural wealth, vast arable land, and billions in diaspora remittances, credit rating agencies have delivered 94% of all downgrades in the past decade while arbitrarily designating only two African nations as investment grade.”

He further criticized the existing global credit rating system for punishing African economies while favoring others, even when economic fundamentals are comparable or, in some cases, better.

Towards an Independent Africa Credit Rating Agency

There’s urgent need for Africa to establish Africa’s own credit rating agency, in what Ruto said would be to counter the influence of global rating agencies – backed by credible data that accurately reflects the continent’s financial landscape.

Such an agency, he argued, would provide fairer assessments, enhance investor confidence, and unlock critical financing to drive Africa’s development agenda.

The call for an African rating system aligns with Africa’s efforts to reclaim economic sovereignty and create a more equitable financial environment for African nations.