Fmr. Finance Chief Seth Terkper highlights bias in credit rating agencies’ treatment of African economies
Former Finance Chief, Seth Terkper, has expressed his concerns regarding the biased treatment of African countries, including Ghana, by credit rating agencies. Acknowledging President Akufo-Addo’s criticism of their actions as reckless and unfair, Mr Terkper emphasized the importance of responsible fiscal management on the part of African governments to mitigate such biases.
Mr Terkper, while acknowledging the historical context of socio-political issues faced by Africa, such as slavery and colonization, urged African governments to take ownership of their economic performance and recognize instances where improvements are needed. Despite recognizing bias against the continent, Mr Terkper maintained that a balanced approach should be adopted, with governments ensuring that they meet expectations and adhere to responsible fiscal practices.
Highlighting a specific example, he pointed to the treatment of domestic bonds in Ghana in 2015. At that time, domestic bonds were treated as Treasury bills, with the Bank of Ghana issuing and refinancing them in collaboration with the Finance Minister. This innovative approach, according to him, led to the rapid development of the domestic stock exchange, attracting investments from banks, pension funds, and the diaspora. The success of this initiative prompted him to call for African nations to develop their own fixed-income or capital markets, enabling greater financial independence and supporting emergency and developmental financing.
Moreover, Mr Terkper cautioned against the unsustainable practice of using total revenue to cover only interest and compensation expenses, which Ghana had experienced prior to the COVID-19 pandemic. He emphasized the need for a reversal of this trend and urged governments to ensure a more balanced distribution of tax revenue to promote financial stability.
While advocating for a nuanced perspective on Africa’s financial markets, the former Finance Chief stressed the importance of avoiding negative descriptions that may perpetuate biases. By fostering a more comprehensive understanding of Africa’s economic landscape, Mr Terkper believes that African nations can work towards overcoming challenges and achieving sustainable economic growth.
