Why the African Union Fired Back at Fitch's Blunder

Fitch Ratings downgraded the Africa Export–Import Bank (Afreximbank) one notch above junk status, citing a non-performing loan ratio allegedly at 7.1 percent—far above the bank’s reported 2.3 percent—and concerns over potential debt restructurings in member states such as Ghana and Zambia. The decision has prompted strong pushback from the African Union’s monitoring body—the African Peer Review Mechanism, which argues the rating is based on flawed data and misinterpretation of Afreximbank’s development mandate.

In an interview with African Currents, Kalu Ojah, Wits Professor Emeritus of Financial Economics, University of Pretoria’s Gordon Institute of Business Sciences, South Africa, warns that the downgrade could increase Afreximbank’s borrowing costs, undermining its ability to finance intra-African trade and critical infrastructure projects under the African Continental Free Trade Area (AfCFTA).

"The African Union set up the monitoring body that monitors all the African institutions that they are responsible for. And it is that institution that came up on behalf of the African Union to say, No, we disagree with you. The basis upon which you've [Fitch] claimed to have revalued upward the credit risk of Afreximbank and therefore the likelihood of default is questionable because, based on our [AU] monitoring activity and therefore information that we have on Afreximbank, that is incorrect [...]. And so, the consequence is huge, widespread, because it will affect one of Africa's most ambitious initiatives [AfCFTA] to pull itself up by its bootstraps by increasing intra-African trade and preparing Africa to be a more important player in the international trading system," Professor Ojah noted.

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