African Union to Launch Independent Financial Rating Agency by 2025
The African Union (AU) plans to launch an African financial rating agency by the end of 2025 to address criticisms of international rating agencies such as S&P, Moody's, and Fitch. Many African leaders believe that these agencies apply a negative bias in their evaluations, limiting access to financial resources necessary for the continent's development. This new agency will be independent, privately-led, and distinguished by its understanding of the local context, relying on African experts and better access to country-specific economic and social data.
The primary objective of this agency is to provide more just and adapted credit ratings that take into account the specificities of African countries. Unlike the major agencies, it will consider the economic, social, and political peculiarities of the continent, offering a more precise and nuanced evaluation of African countries' credit profiles. This approach aims to rebalance the continent's position in the global financial architecture by considering local realities.
The methods of major rating agencies have already had negative consequences for Africa. According to a UNDP report, unfavorable evaluations have resulted in a loss of $74 billion in financing opportunities for the continent. Critics argue that algorithms and macroeconomic models are often ill-suited to the African reality, and that there is a lack of nuance in evaluations, which prioritize a global view over local specificities of African countries.
