Tools for some, shackles for others? - Are credit rating agencies fair enough?
This photo shows signage for Fitch Ratings in New York, the United States, Oct 9, 2011. Credit rating agencies, which evaluate the credit risks of countries and corporations, undoubtedly play a pivotal role in today's globalized economy. For example, while the average debt-to-GDP ratio for developing nations is around 60 to 70 percent — much lower than the 120 percent of developed countries — Global South countries are more likely to experience rating downgrades and be labeled as "high-risk." For instance, in 2022, credit rating agencies downgraded Sri Lanka to default status, triggering a rapid collapse of its capital market and forcing the country to declare sovereign default. Unfortunately, many Global South countries have already been trapped in the negative spiral of "credit rating downgrade — capital outflow — economic distress." To further this cause, Global South countries should use international platforms such as the United Nations and the Group of 77 to advocate for closer scrutiny to ensure the independence of rating agencies and establish a truly fair and transparent rating system.
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