African Union to Launch Continental Credit Ratings Agency in October

The African Peer Review Mechanism (APRM), an African Union backed initiative, will launch a continent-wide credit ratings agency in October as African governments seek to reduce borrowing costs and gain greater control over how their economies are assessed by international investors.

Paul Sikazwe, a technical adviser on debt to the African Union Commission, said the new agency will be launched in Mauritius on October 5.

Sikazwe said the initiative represents progress toward reforming the international financial system and creating an African alternative to the major global credit ratings agencies.

The APRM has spent several years developing the agency, which will assess the creditworthiness of African governments. African leaders have frequently criticised Fitch Ratings, Moody’s and S&P Global Ratings, arguing that the major Western agencies sometimes overestimate the risks of investing in African economies.

The agencies have rejected those accusations, saying their methodologies are applied consistently across countries and are based on economic and financial risks.

The new ratings agency comes as African countries face continued pressure from high debt levels and expensive borrowing. Heavy borrowing, economic mismanagement and external shocks have contributed to sovereign debt crises and defaults in countries including Zambia, Ghana and Ethiopia in recent years.

African officials hope a continent-focused ratings institution will provide investors with additional assessments of African economies and potentially help governments challenge ratings they believe do not accurately reflect their economic conditions.

Sikazwe also said the African Union is pursuing broader cooperation on debt among its 54 member states. As part of that effort, the bloc plans to inaugurate an African Monetary Institute in Abuja in late October, which is intended to serve as a precursor to a future regional central bank.

The initiatives form part of wider African efforts to strengthen financial integration, improve access to affordable financing and give the continent a stronger voice in the global financial system.