African Union to launch African credit rating agency in October, adviser says

The African Union-backed initiative, the African Peer Review Mechanism (APRM), plans to launch a continent-wide credit ratings agency in October, according to a senior AU adviser. The agency will be established in Mauritius on October 5, aiming to address high borrowing costs faced by African nations. Paul Sikazwe, technical adviser on debt to the African Union Commission, highlighted the ratings agency as a significant step towards reforming the international financial architecture.

The APRM has been striving to create an agency that evaluates the creditworthiness of African sovereigns, as governments seek alternatives to the dominant global rating firms like Fitch, Moody’s, and S&P Global. African leaders have consistently criticized these western agencies for not fairly assessing the risk of lending to African countries and for being quick to downgrade economies during crises.

The agencies, however, assert that their ratings follow a consistent formula globally. Debt issues in Africa have been on the rise due to heavy borrowing, economic mismanagement, and external shocks, leading to sovereign defaults in countries like Zambia, Ghana, and Ethiopia. The AU is also working on common debt action among its 54 member states, including the inauguration of an African Monetary Institute in Abuja in late October, which will serve as a precursor to a regional central bank.