14th April 2021

Panel III: Strengthening private creditor and credit rating agencies contribution to pandemic response and recovery

Private creditors participation in debt relief initiatives such as Debt Service Suspension Initiative (DSSI) has been insufficient, in part because eligible countries were concerned about the impact of requesting private creditors participation on their sovereign ratings. Official creditors cautioned that the lack of participation of private creditors may compromise their efforts to create breathing space for the most vulnerable countries. More broadly, the methods and procyclicality of credit ratings have long been debated. The action of countries striving to maintain their rating grades through tight macroeconomic policies are often counterproductive for long-term investment and growth. This session will examine how public and private actors can work together to facilitate the contribution of private creditors and credit rating agencies to developing countries’ crisis response.

Guiding questions:

  1. What are the major obstacles that have prevented private creditors’ participation in debt relief initiatives?
  2. In view of the effects of the pandemic, what adjustments have been made to the analytical assumptions and other inputs that they use when assigning and maintaining ratings?
  3. What technical and regulatory updates are needed to address the potential procyclicality of sovereign credit rating downgrade, considering the varying regulatory systems of different countries?

Read the full statement on Credit Rating Agencies that Jason Braganza, AFRODAD's Executive Director issued during the 4th Session at the 2021 UN ECOSOC FFD meeting. You may also watch the meeting here.

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