They rely on outdated assumptions: Ruto criticizes biased credit ratings on Africa

President William Ruto has criticized global credit rating agencies, arguing that their assessments of African economies are unfair and outdated. He pointed out that these agencies rely on flawed models and assumptions, resulting in exaggerated risks and high borrowing costs for African countries.

Speaking at the Presidential Breakfast during the 38th Ordinary Assembly of the African Union in Addis Ababa, Ethiopia, Ruto stated that these biased evaluations have cost Africa approximately $75 billion (Sh9.7 trillion) in missed opportunities.

Despite the continent's vast natural resources, agricultural potential, strong diaspora remittances, and significant carbon sinks, credit rating agencies have downgraded African economies 94% of the time over the last decade. Meanwhile, only two African nations have been given investment-grade ratings.

According to Ruto, this unfair rating system discourages investment and limits economic growth across the continent. He described the agencies as a "financial straitjacket" that punishes African economies while favoring others, even when economic conditions are comparable or better.

The President emphasized that global financial systems should be built on fairness, transparency, and merit. However, he argued that these principles are not applied equally when it comes to Africa. To address this issue, he announced the creation of the African Credit Rating Agency (AfCRA), which will offer a more accurate and data-driven reflection of Africa’s economic reality.

Ruto stressed that AfCRA is necessary, not just as an alternative, but as an essential institution to provide fairer ratings. He called for the agency to be recognized globally and based on rigorous data to ensure credibility. Africa, he said, would no longer accept being misjudged by unfair evaluation systems.

He also highlighted the economic potential of improving Africa’s credit ratings. A single-level improvement, he noted, could unlock an additional $15.5 billion in funding, which could significantly support infrastructure development across the continent.

Additionally, Ruto acknowledged the support of the United Nations Development Programme (UNDP) and AfriCatalyst in strengthening Africa’s creditworthiness. He echoed the sentiments of African Development Bank President Akinwumi Adesina, stating that the perception of risk does not always match the actual level of risk.

In conclusion, Ruto reaffirmed that Africa must take control of its financial narrative to ensure fair and transparent assessments that reflect the true potential of its economies.