Rating ourselves: What’s the future of Africa Credit Rating Agency

Описание: ABSTRACT
The Big 3 global credit rating agencies—namely, Fitch, Moody's, Standards & Poors—are key players in determining the cost at which global governments, including from Africa, can borrow funds from international capital markets (ICMs). Their sovereign risk assessments of a country’s ability to repay its debt and assign credit ratings (e.g., AAA, BBB, BB+, etc.), are key to the pricing of these loans. Higher-rated countries borrow at lower interest rates, while lower-rated ones face higher costs due to perceived risks. However, the power wielded by these agencies has become increasingly controversial, with many facing intense scrutiny from African policymakers. Accusations of an African bias have inflated borrowing costs or even shut countries out of ICMs and led to growing calls for a continental alternative. In the past few years, countries like Ghana, Zambia, and Ethiopia have faced credit rating downgrades that impacted their ability to refinance debt affordably. In response to these perceived biases, the Africa Credit Rating Agency (AfCRA), which is under the auspices of the African Union (AU), has been proposed as a continental response to providing independent, credible, and African-owned credit ratings, thus asserting Africa’s position on global financial governance architecture. This talk will discuss the what, how, and controversy surrounding the country and sovereign risk assessment. It will also discuss the future AfCRA, including institutional arrangements to ensure credibility and independence. With many African economies heavily reliant on external financing, the stakes could not be higher.