Ghana, other African countries losing $75bn over ‘bias’ rating by credit rating agencies – UNDP
The United Nations Development Programme (UNDP) has sounded the alarm over perceived bias exhibited by three major credit rating agencies towards certain African countries, including the Republic of Ghana. In its latest report on reducing borrowing costs in Africa, the UNDP argues that the ongoing downgrading of Ghana’s economy is rooted in “less subjective assessments,” resulting in substantial financial losses amounting to approximately $75 billion for the country and other African nations.
The staggering sum saved could have potentially spared Ghana from resorting to a $3 billion bailout from the International Monetary Fund (IMF). Ahunna Eziakonwa, the Regional Director of the UNDP, expressed her concerns during an interview, citing a recent study by the agency on borrowing costs and credit rating bias that puts African countries at a significant disadvantage.
Eziakonwa underlined the significance of addressing the prevailing bias, which could yield annual savings of $75 billion for the 16 countries surveyed, including Ghana. She emphasized the need for ratings to be based on objective data rather than subjective perceptions, and urged for a fair assessment of African countries’ potential and offerings. By adopting such an approach, Eziakonwa argued, many African countries would not find themselves languishing in the “junk basket” of credit ratings.
President Nana Akufo-Addo of Ghana also criticized global rating agencies, lambasting their reckless and unfriendly practices, particularly towards struggling developing economies. During Ghana’s economic crisis, all major rating agencies downgraded the nation’s creditworthiness to junk status, effectively barring it from accessing the capital market. Speaking at the 30th Afrieximbank annual general meeting, President Akufo-Addo decried the rating agencies’ behavior, which turned Ghana’s liquidity crisis into a solvency crisis.
The UNDP report and President Akufo-Addo’s remarks shed light on the pressing concerns surrounding credit rating bias and its consequential impact on African countries. The call to rectify this bias and base credit ratings on objective data underscores the urgent need for a fair and accurate representation of African economies, enabling them to foster growth and development unencumbered by unwarranted financial constraints.
