President William Ruto
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In a forceful address at the African Union's 38th Ordinary Assembly, President William Ruto criticized global credit rating agencies for what he characterizes as systemic bias against African economies.
Speaking during the Presidential Breakfast in Addis Ababa, Ethiopia, Ruto argued that these agencies apply outdated models and methodologies, which lead to disproportionately high borrowing costs and distorted assessments that hinder Africa's economic growth potential. Ruto quantified the stakes, citing an estimated $75 billion in lost opportunities linked to these perceived biases.
He points out that despite Africa's wealth in natural resources, abundant arable land, substantial diaspora remittances, and the presence of the world's largest carbon sinks, credit rating agencies have issued a staggering 94% of downgrades to African nations over the past decade. In stark contrast, only two African countries hold investment-grade ratings.
The president highlights the inequitable treatment of African economies, noting that they are often assessed more harshly than their global counterparts, despite demonstrating comparable or even superior economic fundamentals. In response to these challenges, Ruto proposes the creation of the African Credit Rating Agency (AfCRA), which he believes is essential not only as an alternative to existing credit rating systems but also as a necessity for accurately reflecting African economic realities.
"These agencies impose a financial straitjacket on Africa, punishing our economies while rewarding others," Ruto asserts.
He emphasizes the need for a globally credible agency grounded in rigorous data and assessments tailored to the continent's unique context. The potential benefits of improving Africa's credit ratings were also highlighted, with Ruto explaining that even a single-level upgrade could facilitate an additional $15.5 billion in funding, vital for addressing the continent's pressing infrastructure needs.
He envisions AfCRA as a complement to international agencies, aimed at bridging analytical gaps by conducting in-depth assessments that these agencies may overlook. Ruto's remarks were further supported by input from the United Nations Development Programme and AfriCatalyst, which are collaborating to enhance Africa's creditworthiness. Echoing the views of African Development Bank President Akinwumi Adesina, Ruto concluded, "The perception of risk is not the reality of risk. Wrong scales will always give wrong weights."