AU body accuses Moody's of premature comments on Kenya Eurobond plan

Friday August 11 2023

Delegates follow proceedings during an African Peer Review Mechanism summit. PHOTO | AFP


The African Peer Review Mechanism (APRM), a continental self-monitoring platform for member states, is siding with Kenyan President William Ruto who has criticised rating agency Moody’s of blackmail.

Kenya has a pile of Eurobond debt maturing in 2024 and has sought to buy back a portion of it to extend the repayment plan. But Moody’s said last week it might treat that as a default, something which may affect the cost of the buy-back.

And the APRM, an autonomous organ of the African Union and charged with ensuring best practices in economic governance and management, said the comments by Moody’s “were made prematurely before the official details and the terms of the buyback are made public.”

In a statement on Friday, APRM said these comments have resulted in a selloff in Kenya’s Eurobonds, spiked yields and consequently led to a continued depreciation of the local currency.

Read: Kenya shilling hits 150 against US dollar

"This undermines the government’s fiscal efforts, diminishing investors’ appetite and confidence, thereby compromising the success of the buyback program,” APRM said.


“The APRM further views Moody’s speculative comments on Kenya’s default event as, in-effect, a pre-emptive rating action equates to a ‘premature release of a credit rating to the public’,” they added.

Moody’s Vice President and Senior Credit Officer David Rogovic had made the comments in response to queries by Bloomberg. He said redeeming the bonds at a price lower than the par value would constitute and economic loss to investors, hence they would treat it as a default.

But APRM says this was “highly speculative, damaging, and ignores the ‘voluntary’ nature of the proposed bond buyback, which allows investors the right not to participate.”

APRM called on the African Network of National Regulators of Rating Agencies to take action to ensure “proper conduct” of rating agencies, to cub “continuing impromptu pessimistic and negative commentaries by rating analysts that are neither linked to any rating action nor in-depth research report.”

Read: AU questions credit ratings of African states, mulls own tool

The stance by APRM adds to the rising criticism by the continental body which says Western credit agencies routinely downgrade African economies making it expensive for the countries to access the market.

The AU has proposed a continental rating agency which will consider the overall wealth of African economies in determining risk. The idea of retooled rating criteria was first mooted by the African Development Bank earlier in the year. The continental development lender argues that rating agencies have often ignored existing wealth in countries, such as ability to absorb emissions from industrialised polluters using the African countries’ natural forests, or the fact that African countries are not contributing to some of the global problems that have hurt economies.