Question

    Why is the African Union planning to launch a new

    African credit rating agency?
    A To compete with existing global credit rating agencies Correct Answer Incorrect Answer
    B To assess lending risks associated with African countries more fairly Correct Answer Incorrect Answer
    C To reduce the influence of the "big three" ratings agencies Correct Answer Incorrect Answer
    D To generate revenue by rating African countries Correct Answer Incorrect Answer
    E To provide additional context for investors purchasing African bonds Correct Answer Incorrect Answer

    Solution

    The African Union plans to launch a new African credit rating agency next year in response to its concerns about what it views as unfair ratings given to African countries. The agency will generate its own evaluation of lending risks associated with African countries.  It will operate within the continent, self-funding its operations, and aims to provide additional context for investors when making decisions about purchasing African bonds or extending private loans to countries. The African Union and its member nations’ leaders assert that the “big three” ratings agencies – Moody’s, Fitch, and S&P Global Ratings – do not fairly assess the lending risks associated with African countries. A study by the UN earlier had shown that subjective biases in credit ratings had cost African countries a combined US$74.5 billion. Learn Along About African Union The African Union is a continental union consisting of 55 member states located on the continent of Africa. The AU was announced in the Sirte Declaration in Sirte, Libya, on 9 September 1999, calling for the establishment of the African Union.  Headquarters: Addis Ababa, Ethiopia                 Founded: 9 July 2002

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