{"id":23627,"date":"2023-01-05T09:04:55","date_gmt":"2023-01-05T09:04:55","guid":{"rendered":"https:\/\/www.africa-press.net\/lesotho\/all-news\/african-debt-what-about-the-role-of-rating-agencies"},"modified":"2023-01-05T09:50:52","modified_gmt":"2023-01-05T09:50:52","slug":"african-debt-what-about-the-role-of-rating-agencies","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/lesotho\/all-news\/african-debt-what-about-the-role-of-rating-agencies","title":{"rendered":"African debt: What about the role of rating agencies?"},"content":{"rendered":"

Africa-Press – Lesotho. <\/strong><\/span>The global leaders in financial ratings for debt are once again facing a salvo of criticism from some 60 development actors. Here are some explanations and responses from the institutions in question.<\/p>\n

\u201cA detailed analysis showed that 61 of 154 rated sovereigns were downgraded by at least one of the three major rating agencies during the Covid-19 pandemic.<\/p>\n

Developing countries were [affected] by almost all sovereign downgrades, negative outlooks and rating revisions,\u201d says the Financing for Sustainable Development Report 2022, which was published on 12 April.<\/p>\n

The report, which devotes a long \u2013 and largely unnoticed \u2013 section to the detrimental impact of the rating agencies\u2019 decisions, was produced by the UN\u2019s Inter-Agency Task Force on Financing for Development and some 60 multilateral institutions, including the IMF, the World Bank, the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors and the Financial Stability Board.<\/p>\n

Partial severity The study draws a parallel between the severity of the world\u2019s leading financial rating agencies \u2013 Moody\u2019s, Standard & Poor\u2019s and Fitch Ratings \u2013 towards the countries of the South, and their relative leniency towards rich nations.<\/p>\n

\u201cDeveloped countries, which have experienced a much larger increase in debt and economic slowdown, have largely escaped downgrades, reinforcing their access to abundant and affordable market financing,\u201d the report\u2019s authors say, stressing \u201cthe importance of transparent methodologies to avoid undermining confidence in ratings\u201d.<\/p>\n

UN\u2019s Financing for Sustainable Development Report 2022 \u201cAll Fitch\u2019s sovereign rating decisions are made solely on the basis of globally consistent and publicly available rating criteria,\u201d a spokesperson for the New York-based agency tells us.<\/p>\n

Fitch\u2019s representative also insists on the transparency of its decision-making. \u201cThe rating factors and sensitivities are clearly identified in our public comments. The rating decisions are based on independent, solid, transparent and rapid analysis,\u201d he says.<\/p>\n

On the rating gap between developed countries and those in the developing or emerging world, our interlocutor recalls that the former have, among other things, \u201chigh incomes, strong governance standards, diversified economies, deep local capital markets\u201d, as well as \u201cforeign exchange reserves and debt largely denominated in their own currency\u201d.<\/p>\n

Hence their \u201chigh debt tolerance and lower borrowing costs compared to economies without these credit fundamentals\u201d. Standard & Poor\u2019s said it could not immediately respond to our request for comment.<\/p>\n

Moody\u2019s, which recently took over the pan-African rating agency Global Credit Ratings (GCR), did not respond. Debt service suspension The latest edition of the Financing for Sustainable Development report also raises the issue of the rating agencies\u2019 attitude towards the Debt Service Suspension Initiative (DSSI).<\/p>\n

In mid-2020, the UN vehemently contested the \u201cplacing under surveillance\u201d of the ratings of several African countries, including Senegal and Cameroon, prior to their participation in the programme with public lenders.<\/p>\n

Moody\u2019s had said that participating in the DSSI \u201cincreases the risk that private sector creditors will suffer losses\u201d. \u201cFitch has not downgraded any country for participation in DSSI, and we have regularly explained our approach in our publications and in discussions in a number of forums,\u201d the agency spokesperson tells us.<\/p>\n

However, the study itself notes that \u201csome developing countries, particularly those with high risk of debt distress, have been deterred from joining the programme for fear that their participation would trigger downgrades\u201d.<\/p>\n

\u201cMore dialogue could have helped avoid such misunderstandings, both on the part of countries and rating agencies. A permanent and formal structure or framework to facilitate further dialogue could be envisaged,\u201d says the report.<\/p>\n

For its authors, \u201cpublic sector debt relief can help strengthen countries\u2019 balance sheets and their ability to repay all their debt in the medium term\u201d.<\/p>\n

Has the climate factor been taken into account? The April report makes a new set of arguments against international agencies regarding their inadequate consideration of climate change.<\/p>\n

The study\u2019s authors acknowledge that these financial analysis institutions \u201calready incorporate climate risk into their ratings\u201d, but they argue that \u201ca country\u2019s efforts to invest in the development goals, including climate resilience and adaptation\u201d should be taken into account \u201cfavourably in ratings\u201d, in the same way as \u201ccapital expenditure\u201d.<\/p>\n

We expect climate change to trigger more rating changes as the effects become clearer, closer and more significant \u201cIdeally, rating methodologies should incorporate longer-term factors, such as environmental and social risks and improvements,\u201d the authors say, which would \u201ccapture the positive effects of investments in climate and environmental resilience\u201d.<\/p>\n

Fitch Ratings insists that it takes climate change into account in its sovereign ratings, \u201cas it does for all factors it considers relevant and important to creditworthiness\u201d.<\/p>\n

However, it acknowledges that ratings \u201cgenerally give more weight to current developments than to uncertain long-term projections\u201d. According to its representative, however, Fitch expects \u201cclimate change to trigger more rating changes as the effects become clearer, closer and more significant\u201d.<\/p>\n

For More News And Analysis About Lesotho<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – Lesotho. The global leaders in financial ratings for debt are once again facing a salvo of criticism from some 60 development actors. Here are some explanations and responses from the institutions in question. \u201cA detailed analysis showed that 61 of 154 rated sovereigns were downgraded by at least one of the three major […]<\/p>\n","protected":false},"author":84,"featured_media":23626,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,6],"tags":[233,246,314,245],"class_list":["post-23627","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-files","tag-africa-press","tag-africa-press-lesotho","tag-african","tag-lesotho"],"yoast_head":"\nAfrican debt: What about the role of rating agencies? - Lesotho<\/title>\n<meta name=\"description\" content=\"The global leaders in financial ratings for debt are once again facing a salvo of criticism from some 60 development act ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/lesotho\/all-news\/african-debt-what-about-the-role-of-rating-agencies\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"African debt: What about the role of rating agencies?\" \/>\n<meta property=\"og:description\" content=\"The global leaders in financial ratings for debt are once again facing a salvo of criticism from some 60 development act ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/lesotho\/all-news\/african-debt-what-about-the-role-of-rating-agencies\" \/>\n<meta property=\"og:site_name\" content=\"Lesotho\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2023-01-05T09:04:55+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-01-05T09:50:52+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/lesotho\/sites\/62\/2023\/01\/postQueueImg_1672897118.19.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"732\" \/>\n\t<meta property=\"og:image:height\" content=\"419\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/lesotho\/all-news\/african-debt-what-about-the-role-of-rating-agencies#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/lesotho\/all-news\/african-debt-what-about-the-role-of-rating-agencies\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/lesotho\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"African debt: What about the role of rating agencies?\",\"datePublished\":\"2023-01-05T09:04:55+00:00\",\"dateModified\":\"2023-01-05T09:50:52+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/lesotho\/all-news\/african-debt-what-about-the-role-of-rating-agencies\"},\"wordCount\":813,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/lesotho\/all-news\/african-debt-what-about-the-role-of-rating-agencies#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/lesotho\/sites\/62\/2023\/01\/postQueueImg_1672897118.19.jpg\",\"keywords\":[\"Africa Press\",\"Africa Press-Lesotho\",\"African\",\"Lesotho\"],\"articleSection\":[\"all news\",\"files\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/lesotho\/all-news\/african-debt-what-about-the-role-of-rating-agencies#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/lesotho\/all-news\/african-debt-what-about-the-role-of-rating-agencies\",\"url\":\"https:\/\/www.africa-press.net\/lesotho\/all-news\/african-debt-what-about-the-role-of-rating-agencies\",\"name\":\"African debt: What about the role of rating agencies? 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