The politics of credit ratings

One of the best put-down lines I have heard in a long time came from a young man during a discussion about Nigeria’s fuel subsidy and the demonstrations that followed its withdrawal.

A panel of four was debating the subject on one of the Nigerian television stations.

Tempers were raised – and the host of the programme interjected with: “We shouldn’t forget that in neighbouring Ghana, they have also just withdrawn all subsidies on the price of fuel.”

Quick as a flash came the young man: “Don’t bring in Ghana, the size of their budget is like or even less than the budget of Lagos state.”

And with a very dismissive wave of his left hand, he moved onto another subject.

That, I thought, should now put the matter to rest. People should really compare like with like – and not pineapples with pawpaws.

And so I approach the subject of the downgrading by rating agencies of the economies of some countries with a lot of trepidation.

Battered egos?

I am afraid here in Ghana we have been occupied by far more interesting stories than the downgrading of European countries – and so the story of France’s slide down the ratings did not make it into our newspapers or radio and television bulletins.

But let us recall that France has been downgraded from a AAA rating to a AA.

So should we be concerned that France has lost her AAA rating? Or the US or Italy or all the other countries that are said to have been placed on a watch-list by the rating agencies?

I note that of the 54 countries on the continent, only 18 are given any rating whatsoever – with Botswana and South Africa doing best with As of various categories.

Libya – which used to have an A rating – has dropped off the listings for reasons we shall not get into at the moment.

I must confess that I have not quite mastered the whole rating business. For example, is it better to have a CCC rating as Greece currently has – which I understand is equivalent to junk status? Or is it better not to be rated at all?

If people’s egos are taking a battering and they are agonizing about being downgraded to AA+ and you have no grading whatsoever or you are congratulating yourself for having been upgraded from B to B+, should you get involved in any discussion about downgrading?

It also seems to me that the much-coveted AAA rating can only exist when it is an exclusive grouping.

Even if about 25% of all countries attain a AAA rating, it will surely lose its lustre.

And so it would therefore be in the interest of the rating agencies to make sure that some of us remain in the ratings ranks of junk status – and that makes me suspicious.

But more importantly, can these agencies ever really understand how we rank well-being?

No matter what your bank balance is, should you get top-notch rating when there were only 40 people at the funeral of your father?

One of the agencies apparently claims that a company cannot get a higher rating than the country in which it is sited.

Now that cannot be right.

Over here many people are mercifully doing so much better than the country they live in.

In other words Ghana might only make a B+ – but quite a number of Ghanaians have a AAA ranking.

By Elizabeth Ohene

Source: BBC