The group believes international credit rating agencies have been giving erroneous ratings to African countries.
The African Union (AU) plans to launch its own sovereign credit rating agency next year as an alternative to the “big three” international rating agencies, which it believes unfairly rank countries on the continent.
Moody’s, Fitch and S&P make significant errors in their ratings, yet continue to influence global financing decisions and the flow of capital, according to a report for the United Nations Economic Commission for Africa (UNECA).
The report says that Ghana’s president Nana Akufo-Addo criticised the agencies for exacerbating fiscal challenges in developing countries with unwarranted rating downgrades that shut governments out of the capital markets.
As a result, the AU wants to establish the African Credit Rating Agency as an independent entity of the group, with the aim of assessing the risk of lending to the continent’s countries.
After its latest analysis, the “big three” concluded that sovereign credit ratings in Africa continue on a downward spiral, with five economies being downgraded in the first half of this year.
This trend, however, does not reflect the optimism of economic recovery projected for 2023 by the African Development Bank, the report for UNECA highlights.
All three ratings agencies deny any bias and say their ratings follow the same formula everywhere in the world.