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A Case for African States To Invest in Accurate Data for Ratings Agencies

A number of African countries have recently been contesting decisions by credit rating agencies. Some have raised objections that the rating agencies lack understanding of their economic environment. Others have challenged the correctness of their ratings on the basis that the agencies had not discussed them with the country’s representatives. There is indeed a problem when it comes to credible data. Most African countries lack reliable and up-to-date data. Where it is available, analysts and researchers have questioned its accuracy. Credible macroeconomic data and accurate information about how countries are running their finances is key to determining business confidence and market sentiment. If governments fail to ensure that financial markets can get reliable data, the public media assume this role. In turn, investors become more speculative. Where credible data is unavailable, rating agencies make assumptions and estimate the key risk factors. These estimates can prejudice the risk profile of a country, especially if the lead rating analyst is pessimistic about the country’s economic outlook.