(3 minutes read)
African countries complain about the ratings they receive from global credit rating agencies do not reflect reality; they would exaggerate the perceived risk of investing in Africa based on subjective factors. The African Union chairperson President Macky Sall called for the founding of an African credit rating agency
African countries complain that the ratings they receive from global credit rating agencies do not reflect reality; they would exaggerate the perceived risk of investing in Africa based on subjective factors. The African Union chairperson President Macky Sall called for the founding of an African credit rating agency and www.trendsnafrica.com has reported about that.
Why do African countries need a better credit rating? Since 2006, Eurobonds have grown to become an important source of financing for development projects in various countries across the African continent. In response to the increased activity in the Eurobond market, the frequency of assigning sovereign credit ratings in Africa has risen dramatically since the 2008 financial crisis. Most African countries’ credit ratings have deteriorated, which has had serious implications on the cost of servicing debt.
Over the past 10 years, the tenures of the Eurobonds issued by African countries have ranged from 5 to 40 years. Since Eurobonds are issued on international financial markets, global investors require credit assessments of the issuer country. Therefore, sovereign credit ratings are a core requirement for issuing a Eurobond.
Read Also:
https://trendsnafrica.com/post-pandemic-economic-recovery-of-african-countries-gain-momentum/
https://trendsnafrica.com/pan-african-payment-and-settlement-system-commercially-launched/
AU countries complain that they do not get the right accommodation from the international credit agencies, which most of the time refuse to assess the positive points and give undue weightage to country risks. That is the main reason why the AU wants to have Africa-based rating agencies, which are well-grounded about the situation and can take a call. There are also complaints about the control of big credit rating agencies, which are taking over the African rating agencies. However, analysts are of the view that even if the African credit agencies are created, the past experience indicates that it would take longer for them to reach the level of international acceptance.
