Africa Calls for G20 Reform in Credit Rating Oversight

A panel, reporting under South Africa's G20 presidency, urges the G20 to increase oversight of credit rating agencies, criticizing their flawed methodologies that raise borrowing costs for African countries. They call for transparency and recommend new frameworks to reflect Africa's economy, alongside noting Africa's plan for an independent rating entity.

A panel of experts has called upon the Group of 20 (G20) major economies to enhance their oversight of credit rating agencies. This comes after accusations of these agencies employing flawed methodologies that result in increased borrowing costs for African governments.

The panel, formed under South Africa's presidency of the G20, claims that rating agencies display 'perception biases' which inaccurately rate African risks as higher compared to other regions with similar economic conditions. In a report submitted before the forthcoming G20 summit, the panel urges for stricter oversight and demands transparency in the data and models utilized by these agencies.

Furthermore, the panel recommends revamping rating frameworks to accurately capture the diversity and growth potential inherent in African economies, suggesting this could prevent unjust risk assessments. This initiative comes as the African Union plans to launch its own credit rating agency by 2025, aiming to provide a more regionally accurate risk assessment.

(With inputs from agencies.)