President William Ruto speaks at the 38 ordinary session of the African Union in Addis Ababa, Ethiopia, February 14, 2025. /PCSPresident William Ruto has vouched for the establishment of African Credit Rating Agency saying international credit rating agencies are flawed and paint an unfair picture of African economies.
In his address at the 38th ordinary session of the African Union in Addis Ababa, Ethiopia, Ruto said the distorted review of African economies based on flawed models and outdated assumptions have led to exaggerated risks and unjustifiably high borrowing costs and caused the continent billions in lost opportunities.
“The numbers tell a damning story. The Africa Peer Review Mechanism and the United Nations Development Programme place the cost of biased credit ratings at a staggering $75 billion in lost opportunities,” Ruto said.
The President said that despite Africa boasting of abundant natural resources, 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.
He said the prejudiced assessments come at an enormous cost not just to Africa but to the world at large because they deter investment, distort global trade, and derail progress towards the Sustainable Development Goals (SDGs).
“By misjudging Africa, these agencies deny opportunity to investors and economies and deprive nations of prosperity. The time has come to rewrite our history, reclaim our narrative, and charge the African Renaissance forward,” Ruto said.
The President’s remarks come days after the AU took issue with Moody's latest revision of Kenya's credit outlook from negative to positive.
The African Peer Review Mechanism (APRM) argued that the upgrade was an admission that the downgrade was premature in the first place, considering it skipped the stable outlook phase.
On January, 24, Moody's changed Kenya's outlook from negative to positive and reaffirmed its Caa1 rating, citing a potential ease in liquidity risks and improving debt affordability over time.
The APRM noted that it was rare for a credit rating agency to move credit status from negative to positive, while skipping a stable outlook.
“The change is an admission, in remedy, that a negative outlook was an incorrect rating. This rating action was a reversal of Moody's premature rating action on July 8, 2024 which was largely driven by protests in Kenya over the proposed Finance Bill.”
APRM said the July 2024 rating was speculative, as midterm review data on the Appropriation Bill, the spending allocations, the final budget, the finance bill, and the new cabinet had not yet been released when the rating agency made its announcement.
A Caa1 credit rating indicates a poor standing and very high credit risk, basically meaning a government is likely to default on its bonds.
“This is not the first time Moody's has acted prematurely and erred in its analysis,” the APRM said in its analysis dated January 27.
In his speech to heads of state and government, Ruto said time was nigh for Africa to take its rightful place in shaping global progress in its full capacity and potential.
He said the foundations of global finance are supposed to be anchored on the principles of fairness, transparency and merit.
“Africa will no longer accept to be misjudged by scales that overlook our reality. The winds of change are blowing, and our march forward is as unstoppable as it is relentless,” he said.
In establishing the African Credit Rating Agency, Ruto said the continent will not work alone in this venture but will seek alliances grounded in shared values of dignity, equity and progress.
“This agency must be globally credible and backed by rigorous, credible data and driven by high reporting standards from our own governments. But more importantly, it must reflect Africa's reality correctly.
Ruto said the agency will complement international credit rating agencies by filling data and analytical gaps by using a methodology that is objective, transparent and one that is rooted in the rigors of science rather than the exclusivity of tradecraft.
“We will hold rating agencies to account and demand accurate standards. We will leverage the experience and expertise of Pan-African credit rating agencies, strengthening their capabilities and expanding their reach,” Ruto said.
The President said the benefits of Africa establishing her own credit rating agency are ernomous.
He said research shows that a one-level improvement in Africa's average credit rating would unlock $15.5 billion in additional funding.
“This alone would outstrip Official Development Assistance by 12 per cent and meet 80 per cent of Africa's infrastructure needs. The opportunity is within our grasp, and we must seize it,” he said.
