The African Credit Rating Agency: What can African Nations Expect?
FEATURED BLOG
The African Credit Rating Agency: What can African Nations Expect?
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Aug 2025
The African Credit Rating Agency (AfCRA), slated for launch by September 2025, is a transformative step toward financial sovereignty for African nations. Backed by the African Union through the African Peer Review Mechanism (APRM), AfCRA aims to provide credit ratings that reflect the continent’s unique economic realities, challenging the perceived biases of the global “Big Three” agencies including Fitch, Moody’s, and S&P Global Ratings. This initiative responds to decades of criticism that international ratings have unfairly penalized African economies, inflating borrowing costs and limiting access to capital markets.
The AfCRA has the potential to transform Africa’s financial sovereignty by offering fairer, region-specific credit assessments that will lower borrowing costs and unlock billions in development financing. However, its success will depend on building institutional credibility, securing broad stakeholder buy-in, and ensuring strong domestic adoption to challenge the dominance of Western-based rating systems.
The Cost of Subjective Ratings
African countries have long faced the consequences of credit ratings that many argue misrepresent their economic potential. A United Nations Development Programme (UNDP) study conducted in 2023 revealed that subjective risk assessments by international agencies have cost African nations up to $74.5 billion in excess interest payments and foregone financing opportunities. These inflated costs stem from methodologies that often rely on limited data and fail to account for Africa’s diverse economic contexts, leading to higher borrowing costs and restricted market access. For context, $74.5 billion is 80% of Africa’s annual infrastructure investment needs (estimated at $93 billion).
For example, Ghana experienced a credit downgrade by Moody’s in February 2022, with Moody citing liquidity and debt challenges. The Ghanaian government contested this decision, arguing that the downgrade omitted key fiscal reforms, such as budget expenditure controls, and reflected an “institutionalized bias” against African economies. This downgrade led to a sharp increase in Eurobond yields, subsequently adding millions in annual interest costs through yield increases for new debt. For a $1 billion bond, a yield increase from 13% to 15.78% could add $27.8 million annually in interest payments, totaling $278 million over a 10-year bond’s life. This financial strain limits resources for critical development projects.
Zambia is another African country that has previously protested credit rating downgrades it perceives as overlooking domestic reforms. The most recent “Restricted Default” classification by Fitch late last year reflects mounting external and liquidity pressures that undermine the government’s medium-term ability to service debt thereby raising near-term default risk.
Since late 2023, African sovereigns have represented a disproportionate share of global rating cuts amounting to 43% of all downgrades (15 out of 35 worldwide). Sub-Saharan Africa alone accounted for 10 downgrades, or 29% of the total, amplifying the region’s outsized presence in global sovereign debt downgrades.
The AfCRA Offers Optimism
AfCRA’s ratings could unlock up to $15.5 billion in additional funding by offering fairer evaluations, supporting infrastructure, healthcare, and education initiatives across the continent. The AfCRA aims to introduce an African lens to credit ratings by focusing exclusively on African economies, using available region-specific data and socioeconomic indicators. By providing more accurate assessments, AfCRA could reduce the perceived risk premium that inflates borrowing costs for African countries. Capital costs in Africa are three to four times higher compared to other regions, largely due to perceived risks. The AfCRA, through a more balanced assessment framework could help break the cycle in which downgrades, sometimes triggered by short-term liquidity pressures, lead to higher interest rates, which in turn worsen fiscal stress and raise default risks for African nations
That said, the success of the AfCRA will depend on its ability to generate broad-based buy-in, both within Africa and from the international community. Earning the trust of diverse stakeholders is essential. Credibility begins with granting the institution sufficient autonomy and ensuring it can make independent decisions while projecting an image of institutional maturity to the outside world. This independence sends a message of transparency, enabling African governments, businesses, and global investors to view AfCRA as a fair and reliable credit rating mechanism. Securing this foundation early will be important to building a strong and lasting reputation.
Wider acceptance will also require strategic engagement with the right stakeholders. There is little reason to expect that institutions and foreign governments will immediately abandon established, foreign-based credit rating systems when engaging with Africa. AfCRA will, by necessity, begin from a position of relative disadvantage and will remain so for some time. However, by forging the right partnerships and consistently delivering accurate, reliable, and continuously improving assessments, the institution can gradually generate buy-in and expand its influence. Competing head-to-head with the “Big Three” credit rating agencies will be a long-term challenge, not an overnight achievement.
Even more important, African ownership must come first. African governments should actively encourage domestic institutions to adopt and integrate AfCRA’s ratings into their financial systems. Strong local adoption will, in turn, compel international partners to engage with the mechanism, elevating it to global relevance and standards.
As AfCRA prepares for its launch next month, it represents another step toward Africa reclaiming ownership of its financial narrative and economic decision-making. It offers a pathway to reduce dependence on Western-based credit rating agencies and to establish a system rooted in Africa’s unique economic realities. More than a technical reform, this is an opportunity for African institutions to assert themselves on the global stage aligning with the spirit of South-South cooperation and minilateralism to pioneer a new generation of institutions that speak for, and represent Africa in the global financial architecture.