Business Edge | African Countries Pushback Against Ratings Agencies

Following the rapid succession of negative credit ratings Ghana has received in recent times, its government has decried the decision by Moody’s. An African Union panel has also called on the agency to review its outlook for Ghana, suggesting as Ghana alleged, that the agencies made use of incomplete data in its assessments. It’s not the first time African countries will disagree with ratings from the global agencies vis Moody’s, S&P and Fitch, and it has become a popular refrain each time a report is published that scores these countries low. Business Edge explores the pushback against credit ratings by African countries and if the claims have any validity to them. Lekan Onabanjo is joined by Aly Khan Satchu, Africa geoeconomist and CEO of RICH Management.

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Satchu doesn’t agree at all that there’s a deliberate agenda to score African countries low and calls it a reflection of the countries’ policies that brought them to that point. “This is a common refrain from African countries that have misbehaved and misspent and played fast and loose with their finances. Ghana is a classic example”, he said. He adds that these credit ratings agencies, especially the three most widely accepted ones, have analysts that examine the subjects carefully before reaching a conclusion. “Whenever you see a pushback against these agencies, it’s usually because policymakers in the countries don’t have an understanding of how it works.

On the count of the agencies having a set of rules for African countries compared to the United States for example, which has a debt-to-GDP ratio of 130% and the highest rating of AAA, Mr Satchu says it’s because African countries simply cannot compare to the liquidity of the American economy and the value of its currency. “The dollar is the most tradeable currency in the world. 63% of all global transactions are done in dollars,” he says.

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However, the negative ratings and outlooks have a direct consequence on the affected countries’ ability to access funds in the international finance market. Aly Khan Satchu says all they need to do is to fix the economy of their respective companies, point to Zambia which still has a negative rating but the president has been seen to be working to fix the economy and as such, is able to raise funds for its infrastructure development and investment.


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