Re-setting Relations Between Credit Rating Agencies and the Global South

According to the United Nations, subjectivities in global credit ratings— Issued by major credit rating agencies (CRAs)—cost African countries $75 billion annually. Indeed, African countries face some of the highest borrowing costs globally, largely due to structural economic and governance challenges, as well as the impact of low credit ratings. These ratings also play a critical role in determining the cost of borrowing for countries. Low ratings often translate into high-interest rates, making debt servicing expensive and limiting governments’ fiscal space to invest in key development priorities.

This policy brief addresses key areas for credit rating reform, including re-evaluating asset categorization, particularly for investments in technology and infrastructure, and refining CRA approaches to debt rescheduling. It also:

• Calls for a reassessment of African economies, especially those rich in critical minerals, which are often undervalued using traditional GDP metrics.
• Examines efforts to address the chronic credit rating challenges and reviews the G20’s role.
• Offers recommendations for policy reforms to current credit rating methodologies used by major CRAs.

This brief will also be published as part of the T20 policy briefings for the G20 under the South African G20 presidency.