Senior Credit Research Analyst at REDD Intelligence, Mark Bohlund, says the claim that rating agencies are biased against African economies is false.

His comment follows several criticisms from African leaders concerning the work of credit rating agencies.

African leaders, including Ghana’s Akufo-Addo, have called out rating agencies for treating African economies unfairly through their issuance of downgrades which have ultimately led to a few countries including Ghana, being pushed out of international capital markets.

According to Mr. Bohlund, the criticisms are unfounded as credit rating agencies often react to market behaviours and do not, themselves, provoke these market behaviours.

“It is worth keeping in mind that credit rating is often lagging indicator that the market moves before the credit rating agencies do. So when there is a downgrade or an upgrade for most of the time that is already priced into the Eurobond deals. And so it actually doesn’t have an impact on bond pricing,” he said on JoyNews’ PM Express.

He indicated that those to blame for African countries being pushed out of capital markets are the successive African governments that have relied heavily on external borrowing to finance their budgets.

According to him, the argument by the Ghanaian government that the Covid-19 pandemic was responsible for their defaulting is neither here nor there, especially when the fiscal figures of the country already showed a distressed economy.  

“What they do, these rating agencies, is to assess the probability of a negative credit event because I know the Ghanaian government was very critical about the downgrades you’ve had over the past one or two years.

“You had a negative credit event around both the external borrowing, Eurobonds, so in hindsight you can definitely not say that they were wrong in making those downgrades. I’ll argue that maybe they should have made these downgrades earlier but the ratings in 2020 maybe are too optimistic if anything.

“Because I look at the fiscal figures, the borrowing pattern of the government, where Ghana was headed at the time, and personally I will push against any claim that Zambia or Ghana was pushed into default because of Covid.

“I mean these open with excessive fiscal deficit and heavy external borrowing had been in place for close to a decade if not even longer and of course if you spend I mean, your interest to government revenue has been the  most important indicator and that has been steadily rising,” he said.