African Union-Backed Credit Rating Agency Set for October Launch

Nairobi—The African Peer Review Mechanism (APRM), an African Union-backed initiative, will launch a continent-wide credit ratings agency in October as African governments seek to reduce borrowing costs and reshape how sovereign risk is assessed across the continent.

Paul Sikazwe, technical adviser on debt to the African Union Commission, said the new agency will be officially launched in Mauritius on October 5.

“This is a sign of progress in our ambition to provide momentum for the reform of the international financial architecture, ” Sikazwe said at a debt and development conference in Nairobi hosted by campaign group AfroDad.

Africa Seeks Alternative To Global Ratings Firms

The APRM has spent several years developing the agency, which is intended to provide an African-based assessment of the creditworthiness of sovereign borrowers.

African leaders have repeatedly criticised the dominant global ratings firms — Fitch Ratings, Moody’s and S& P Global Ratings — arguing that their assessments can overstate risks associated with African economies and contribute to higher borrowing costs.

The agencies have rejected the criticism, saying their methodologies are applied consistently across countries and markets.

The debate has gained greater urgency as African governments have faced rising debt burdens, economic shocks and tighter global financing conditions.

Countries including Zambia, Ghana and Ethiopia have experienced sovereign defaults in recent years following periods of heavy borrowing, economic difficulties and external shocks.

AU Pushes Broader Debt Reforms

The planned credit ratings agency forms part of a wider African Union effort to reform the international financial architecture and strengthen the continent's influence over how African economies are assessed and financed.

Sikazwe said the AU is also advancing plans for its 54 member states to take common action on debt.

Another key initiative is the planned inauguration of an African Monetary Institute in Abuja in late October. The institution is expected to serve as a precursor to a future regional central bank.

The initiatives reflect a broader push by African governments to strengthen continental financial institutions, improve access to capital and reduce the cost of financing development.

Source: Reuters

Reporting: Duncan Miriri

Editing: Karin Strohecker