UN Economic Commission for Africa Meets to Push for Creation of African Credit Rating Agency

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UN Economic Commission for Africa Meets to Push for Creation of African Credit Rating Agency
UN Economic Commission for Africa Meets to Push for Creation of African Credit Rating Agency

Africa-Press – Gambia. Credit ratings are designed to assess a borrower’s risk of default and take into account the terms on which banks and others will lend to them. Last year, the Technical Committee of Finance Ministers of the African Union adopted a declaration of support for the African Credit Rating Agency on the basis of self-financing and sustainability.

The United Nations Economic Commission for Africa (UNECA), in collaboration with the African Peer Review Mechanism (APRM), organized a retreat in Lusaka, Zambia, on the establishment of an African Credit Rating Agency, UNECA said in a statement.

The organization noted that the African Union has developed legal, financial and structural aspects of the rating agency that support the characteristics of sustainability, reliability and independence of the agency.

“An Africa Credit Rating Agency is an important step towards intra-continental integration that would enable African governments to access capital and integrate the continent with global financial markets,” the APRM said in a statement.

The agency added that the need for the continent’s credit agency stems from the fact that 22 other African countries do not have credit ratings from international rating agencies.In addition, the rating agency will provide environmental, social and governance assessments and foreign direct investment ratings – services much needed on the continent to complement governments’ efforts to support the development of domestic financial markets, the APRM said.

“With the backing that comes from the support of the AU, it is envisaged that the rating agency will secure substantial business in the ratings of domestic instruments that are aligned with the continent’s goals. It will have the advantage of understanding the domestic context of Africa, issue more informative and detailed ratings than those issued by international rating agencies,” the agency said.

The AU said last September that the “big three” rating agencies – Moody’s, Fitch and S&P Global Ratings – unfairly assess the credit risk of African countries and downgrade them more quickly during crises such as the COVID-19 pandemic.

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