To reduce borrowing costs and foster economic independence, Africa is set to establish its own credit ratings agency by 2025.
The decision, announced by Albert Muchanga, Commissioner for Development, Trade, Tourism, Industry, and Minerals at the African Union (AU), marks a step towards addressing long-standing grievances regarding the continent’s treatment by international credit rating firms.
The new agency, which will operate independently of the AU, aims to cater specifically to the needs of African sovereign borrowers. Muchanga emphasized that the initiative seeks to mitigate the perceived unfair treatment that has led to higher interest rates compared to other emerging markets and developed nations.
“We feel that we’ve not been treated very well when it comes to ratings and the cost of borrowing,” Muchanga stated during a press conference in Accra, Ghana. “We want an institution developed by Africans to contribute to the process of de-risking the African capital market so that we can borrow competitively at home and abroad.”
The concept of establishing a regional credit ratings agency gained momentum in 2021 following discussions among African finance ministers. They expressed concerns over the impact of unfavorable credit ratings from international agencies on Africa’s ability to access affordable financing.
The initiative is being spearheaded by collaborative efforts involving the African Peer Review Mechanism, African Development Bank, African Export Import Bank, and the AU Commission.
According to Muchanga, the project is now advancing towards its operational phase, focusing on finalizing a comprehensive work plan for the agency’s rollout.
“The next phase involves coming up with the final work plan to ensure that we are able to roll it out effectively,” Muchanga said.
