President William Ruto has criticised global credit rating agencies saying they have 'biased' assessments of African economies.
He decried that they rely on outdated assumptions leading to unjustifiably high borrowing costs.
"Global credit rating agencies have not only dealt us a bad hand, they have also deliberately failed Africa," Ruto said.
"They rely on flawed models, outdated assumptions, and systemic bias, painting an unfair picture of our economies and leading to distorted ratings, exaggerated risks, and unjustifiably high borrowing costs.”
He spoke on Thursday during the Presidential Breakfast at the 38th Ordinary Assembly of the African Union in Addis Ababa, Ethiopia.
Ruto highlighted the significant losses Africa has endured due to the biased assessments, amounting to $75 billion (Sh9.7 trillion) in missed opportunities.
He said in a continent abundant with natural wealth, vast arable land, billions in diaspora remittances and the world’s largest carbon sinks, credit rating agencies have delivered 94 per cent of all downgrades in the past decade, while arbitrarily designating only two African nations as investment grade.
"By misjudging Africa, these agencies deny opportunity to investors and economies and deprive nations of prosperity," he emphasised.
He stated that these agencies are “a financial straitjacket imposed on Africa. A system that punishes our economies while rewarding others, even when the fundamentals are comparable if not better”.
Ruto said the foundations of global finance are supposed to be anchored on the principles of fairness, transparency and merit.
“Yet, these principles are disregarded when it comes to Africa,” he stated.
He stressed the need for an African-centric approach and announced the establishment of the African Credit Rating Agency (AfCRA) as essential.
"An African Credit Rating Agency is not just an alternative, it is an imperative," he said.
The President called for the agency to be globally credible, backed by rigorous data, and truly reflect Africa's reality.
He stated that Africa will no longer accept to be misjudged by scales that overlook her reality.
Ruto also highlighted the potential benefits of improving Africa's average credit rating.
"A one-level improvement in Africa's average credit rating could unlock an additional $15.5 billion in funding," he said.
“I want to emphasise that this agency will complement international credit rating agencies by filling data and analytical gaps. In other words, it will do the heavy lifting that international rating agencies may lack the time, inclination, or capacity to undertake”.
This amount could significantly meet a large portion of Africa's infrastructure needs.
At the same time, President Ruto praised the United Nations Development Programme and AfriCatalyst for their support in strengthening Africa's creditworthiness.
He echoed the words of African Development Bank President Akinwumi Adesina, saying, "The perception of risk is not the reality of risk. Wrong scales will always give wrong weights."
