Africa: Having regional rating agency gaining ground

By Agence de Presse Africaine Last updated May 21, 2022

He was speaking on Tuesday at the closing of the 54th session of the Economic Commission for Africa held at the Abdou Diouf International Conference Center in Diamniadio, on the outskirts of Dakar. This pan-African institution, said the former director of the Sovereign Wealth Fund,“ will have to take into account more the resilience of our economies and make…

APA – Diamniadio (Senegal) Special correspondent, Abdourahmane Diallo This financial institution should take into account the realities of the black continent’s economies, which are largely dominated by the informal sector.

The opinion of financial rating agencies has a great influence on access to financial markets. By upgrading a country’s rating, they reduce the risk of investing there and promote access to credit. African economies, often victims of a downgrading of their ratings, are thus confronted with an overestimation of investment risks and a surge in insurance premiums and, as a result, in debt interest rates; hence the need for the continent to have a parallel risk assessment structure.

“Having an African rating agency will allow us to have our own benchmarking. An agency that better understands African realities and that will take into account the impact of the informal sector in our Gross Domestic Product (GDP),” said the Senegalese Minister of Economy, Planning and Cooperation, Amadou Hott.

He was speaking on Tuesday at the closing of the 54th session of the Economic Commission for Africa (CoM2022) held at the Abdou Diouf International Conference Center (Cicad) in Diamniadio, on the outskirts of Dakar.

This pan-African institution, said the former director of the Sovereign Wealth Fund (Fonsis), “will have to take into account more the resilience of our economies and make reports that will inspire international rating agencies” so that they review their methods of risk assessment in Africa.

In his speech at the official opening of CoM2022 last Monday, Macky Sall criticized the procedures used by the rating agencies when it comes to African countries. The Senegalese President pointed out that the 2022 report on the financing of sustainable development had pointed out the limitations and methods of evaluation of these agencies.

“The study establishes a parallel between the speed of the rating agencies with regard to the countries of the South and their relative leniency towards rich nations,” he said.

Citing the report, Macky Sall recalled that developed countries, having experienced an increase in debt and a much greater economic slowdown, have largely escaped downgrades, not without adding that this rating strengthens their access to financial markets.

The document thus insists on the importance of transparent methodologies in order not to undermine confidence in the rating.

This report was produced by some 60 multilateral institutions, including the International Monetary Fund (IMF), the World Bank, and the Basel Committee on Banking Supervision, the Committee of International Insurance Regulators and the Financial Stability Board.

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