Committee for the Abolition of Illegitimate Debt

This incremental movement within a system that structurally withholds investment-grade status from most of the Majority World is not merely a technical failing. It is the product of a historical process in which three private US-based agencies were gradually endowed with the force of law—and with it, the power to shape the borrowing costs, fiscal space, and developmental trajectories of nations that had no say in their creation. The system itself is broken, not because it is imperfectly implemented, but because its foundational assumptions are rooted in colonial logic, capitalist orthodoxy, and the belief that the global economic architecture is even-handed and benign.

Origins: Private Information Sellers for American Railroads

The credit rating agencies Rating agency
Rating agencies Rating agencies, or credit-rating agencies, evaluate creditworthiness. This includes the creditworthiness of corporations, nonprofit organizations and governments, as well as ‘securitized assets’ – which are assets that are bundled together and sold, to investors, as security. Rating agencies assign a letter grade to each bond, which represents an opinion as to the likelihood that the organization will be able to repay both the principal and interest as they become due. Ratings are made on a descending scale: AAA is the highest, then AA, A, BBB, BB, B, etc. A rating of BB or below is considered a ‘junk bond’ because it is likely to default. Many factors go into the assignment of ratings, including the profitability of the organization and its total indebtedness. The three largest credit rating agencies are Moody’s, Standard & Poor’s and Fitch Ratings (FT).

Moody’s : https://www.fitchratings.com/ emerged in the late nineteenth/early 20^th century United States to serve a specific domestic purpose. During the mid-1800s, railroads were the largest corporations in the country, and their construction required vast amounts of capital. Information about their financial health was fragmented, creating an opportunity for pioneers in business information. In 1849, Maine lawyer Henry Varnum Poor published the American Railroad Journal, followed by A History of the Railroads and the Canals of the United States in 1860. His company published the Manual of the Railroads of the United States, updated annually.

John Moody, whose father lost his fortune in the Panics of 1873 and 1879, believed that better information could protect investors from market vagaries. In 1909, he published the first publicly available bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. ratings, mostly concerning railroad bonds. Moody’s was followed by Poor’s Publishing Company in 1916, Standard Statistics Company in 1922, and Fitch Publishing Company in 1924.

These firms sold their ratings to investors in thick manuals. This was the investor-pays model: subscribers paid for access to information. The agencies were private, American, and entirely marginal to global financial governance—minority opinions serving a minority market.

The Regulatory Turn: How Private Opinions Became Public Law

The transformation from private information vendors to global financial gatekeepers began in 1936, when the Office of the Comptroller of the Currency prohibited banks from investing in securities below “investment grade,” as determined by “recognised rating manuals”. Regulators had endowed private safety judgments with the force of law. Insurance regulators and pension fund Pension Fund
Pension Funds Pension funds: investment funds that manage capitalized retirement schemes, they are funded by the employees of one or several companies paying-into the scheme which, often, is also partially funded by the employers. The objective is to pay the pensions of the employees that take part in the scheme. They manage very big amounts of money that are usually invested on the stock markets or financial markets. regulators followed with similar actions.

The crucial moment came in 1975. The Securities and Exchange Commission (SEC) issued rules that crystallised the agencies’ centrality. To make capital requirements sensitive to bond portfolio risk, the SEC decided to use ratings as indicators of risk. It created the category of Nationally Recognised Statistical Rating Organisation (NRSRO) and, in a 1976 no-action letter, clarified that this meant Moody’s, S&P, and Fitch—the so-called Big Three. The SEC mandated the use of NRSRO-created ratings even as officials vigorously debated whether it was wise to endorse agencies operating on the controversial issuer-pays model.

The 1970s also saw the shift from investor-pays to issuer-pays: the entity issuing the bonds pays the rating agency to rate them. The SEC has acknowledged that this model “created a fundamental conflict of interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. ”. Rating agencies are now incentivised to inflate their ratings to please their paying clients—the issuers—to the potential detriment of investors relying on those ratings. As a Senate report later attributed the agencies’ errors in the 2008 crisis in part to these conflicts of interest, scholars have condemned Moody’s and S&P as an “unelected cabal of private agencies”.

The Regulatory Export: Basel and the Globalisation of Minority Opinions

The agencies’ power was not confined to the United States. Through the Basel accords—the international regulatory framework for banking supervision—their ratings were exported to the global financial system. The Basel II framework, transposed into the laws of many countries, made credit ratings a major component of bank capital regulation. The Basel agreements “developed and increased their power” by embedding their judgments in prudential rules that banks worldwide were required to follow.

For Majority World countries, this had profound consequences. Under the Basel framework’s standardised approach, banks in majority world countries were required to use external credit ratings from designated agencies to determine capital requirements. Scholars have demonstrated how Basel II’s inherent pro-cyclicality has an “especially large impact on developing countries”. Combined with Basel II’s reliance on rating agencies, biases against small and medium enterprises, and high costs of implementation for majority world countries, its “potentially distorted impact on competition and pro-cyclicality considerably hampers B-II’s effectiveness as a global supervisory standard”.

The agencies had become, without any democratic mandate, integral to the regulatory infrastructure of global finance. They exercise political influence without elections. Their judgments shape fiscal policy, determine borrowing costs, and constrain developmental choices—yet they are accountable to no electorate, no parliament, no international body.

The Majority World Premium: What the Data Shows

The distribution of sovereign ratings reveals the consequences. As of late 2023, 79 per cent of minority worldcountries held investment-grade ratings, compared to only 24 per cent of majority world countries. In Africa, the situation is starker: only four countries—Botswana, Mauritius, Morocco, and South Africa—hold investment-grade ratings from the Big Three. As of 2025, 32 African countries hold one or more ratings from the Big Three, but the vast majority are assigned sub-investment grade, or “junk” status.

The UNCTAD policy review finds that “subjective indicators, judgements, and sentiment play an important role in determining the rating opinions of rating agencies, and that this creates significant scope for bias”. Several studies have identified “various types of ratings bias that have historically tended to work against the interests of developing countries”. The South Centre notes that “the procyclical behaviour of CRAs, coupled with their biases against majority world countries, have made these countries go through a vicious cycle of successive downgrades”.

A 2023 UNDP report estimated that rating biases cost the African continent **$75 billion annually**. African countries pay, on average, 1.5 percentage points more in interest than other nations with similar economic features. This disparity has cost the continent over $75 billion in excessive borrowing costs—resources that could have funded hospitals, classrooms, or climate adaptation projects. Subjectivity in credit assessments is estimated to have cost some African countries over $75 billion in additional interest payments and forgone lending (UNDP UNDP
United Nations Development Programme The UNDP, founded in 1965 and based in New York, is the UN’s main agency of technical assistance. It helps the DC, without any political restrictions, to set up basic administrative and technical services, trains managerial staff, tries to respond to some of the essential needs of populations, takes the initiative in regional co-operation programmes and co-ordinates, theoretically at least, the local activities of all the UN operations. The UNDP generally relies on Western expertise and techniques, but a third of its contingent of experts come from the Third World. The UNDP publishes an annual Human Development Report which, among other things, classifies countries by their Human Development Rating (HDR).

, 2023) and $46 billion in potential lending (Brookings, 2024). The Brookings Institution notes that this $75 billion loss is “greater than the entire Official Development Assistance ODA
Official Development Assistance Official Development Assistance is the name given to loans granted in financially favourable conditions by the public bodies of the industrialized countries. A loan has only to be agreed at a lower rate of interest than going market rates (a concessionary loan) to be considered as aid, even if it is then repaid to the last cent by the borrowing country. Tied bilateral loans (which oblige the borrowing country to buy products or services from the lending country) and debt cancellation are also counted as part of ODA. Apart from food aid, there are three main ways of using these funds: rural development, infrastructures and non-project aid (financing budget deficits or the balance of payments). The latter increases continually. This aid is made “conditional” upon reduction of the public deficit, privatization, environmental “good behaviour”, care of the very poor, democratization, etc. These conditions are laid down by the main governments of the North, the World Bank and the IMF. The aid goes through three channels: multilateral aid, bilateral aid and the NGOs. (ODA) to Africa in 2021 ($30 billion), more than twice the cost of reducing malaria by 90% (US$34 billion), and six times greater than the cost of vaccinating 70% of Africans (US$12.5 billion) to achieve herd immunity to Covid-19”.

Familiarity as Racialised Method

The agencies defend their methodologies as objective. But the evidence suggests otherwise. Research shows that “familiarity with a country, being closer to a country being rated and home bias (towards the home country of a rating analyst) result in analysts assigning better sovereign rating scores than they do to countries they are not familiar with or live very far from”. Countries that are geographically, culturally, politically, and economically close to the United States are assigned higher credit ratings.

Andreas Fuchs and Kai Gehrig, in their 2017 paper “The Home Bias in Sovereign Ratings,” examined the determinants of sovereign credit ratings for 143 countries by nine rating agencies. They found that nations culturally similar to the ‘home’ countries of the rating agencies tend to receive a higher rating than comparable countries with the same economic fundamentals. Cultural proximity, as measured by linguistic similarity, is shown to be the main transmission channel that explains the advantage of the home country. Countries that are culturally closer receive a better treatment: the larger the linguistic differences between home and sovereign, that is, the more unfamiliar a language, the lower the assigned rating on average. Fuchs and Gehrig recommended greater transparency in rating decisions, and the use of cross-cultural teams to mitigate such biases.

This “familiarity bias” is not neutral. It is a methodological proxy for colonial and racial hierarchies dressed in technical language. The agencies have limited physical presence in Africa: Fitch has no office on the continent; Moody’s has one; S&P has two. Ratings are based on “data from external sources like the International Monetary Fund IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org and the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

” rather than primary data collection. The lack of local offices means that “current assessments are based on desktop reviews and publicly available information”. Majority World countries are assessed with less information, greater scepticism, and higher costs than their minority world counterparts.

But the deeper critique is that the agencies’ methodologies assume the global economic architecture is even-handed and benign. They treat neoliberal orthodoxy—privatisation, deregulation, fiscal austerity, openness to capital flows—as the baseline against which all policy is judged. The UNCTAD review notes that rating agencies place high importance on reserve levels held by low- and middle-income countries, which can result in overinvestment in low-yielding assets instead of in long-term growth. Countries that deviate are penalised. Countries that conform are rewarded. Yet this orthodoxy is itself a product of the same colonial and capitalist structures that produced the rating agencies. The system is not neutral; it is partisan, deeply partisan, in favour of a particular vision of economic order that has been discredited by its own failures—from the Asian Financial Crisis to the 2008 global financial collapse to the debt distress that now grips much of the Majority World.

The American Exception

The downgrade of the United States by Moody’s in June 2026—following S&P’s 2011 downgrade and Fitch’s 2023 downgrade—is often cited as evidence of even-handedness. But the US downgrade had negligible impact on borrowing costs. The market continued to treat US Treasuries as the global benchmark for risk-free assets. Research has shown that the sovereign credit rating downgrade of the US government debt Government debt The total outstanding debt of the State, local authorities, publicly owned companies and organs of social security. “did not have any significant effects on the US equity market”. This is not a failure of the rating agencies; it is a feature of the global financial architecture. The US benefits from the dollar’s reserve currency status, the depth of its capital markets, and the fact that the rating agencies are headquartered in New York and Washington. The agencies’ home countries are assessed with greater familiarity, greater institutional knowledge, and greater market tolerance for political dysfunction.

The Alternatives and Their Fundamental Limitation

China has sought to challenge this dominance. Beijing-based Dagong Global Credit Rating, founded to offer an alternative to the Big Three, has been “heavily criticised for issuing geopolitically biased ratings toward China and its geopolitical allies”. In 2012, Dagong announced a joint venture with a US agency and a Russian agency to construct a new international credit rating system that would “reflect the laws governing the development of our credit-based economy and stand for the common interests of mankind”. The venture, Universal Credit Ratings Group, was headquartered in Hong Kong. Dagong first garnered attention when it downgraded the US government’s sovereign rating in 2010, a year before S&P followed suit. But it has also been refused permission to operate in the US and has faced scrutiny at home for questionable ratings.

The African Union has endorsed the establishment of the African Credit Rating Agency (AfCRA), headquartered in Mauritius and scheduled to launch in 2026. It aims to be “a fully African-owned and private-sector entity” that delivers “fair, independent, and contextually accurate assessments of African economies”. The agency aims to integrate indicators related to the SDG financing gap, debt-for-climate swaps, or resilience capacity—dimensions that the Big Three often overlook.

Other initiatives include the BRICS BRICS The term BRICS (an acronym for Brazil, Russia, India, China and South Africa) was first used in 2001 by Jim O’Neill, then an economist at Goldman Sachs. The strong economic growth of these countries, combined with their important geopolitical position (these 5 countries bring together almost half the world’s population on 4 continents and almost a quarter of the world’s GDP) make the BRICS major players in international economic and financial activities. bloc-level agency proposal, the Islamic International Rating Agency (IIRA) based in Bahrain, and Europe’s Scope Ratings. Japan’s JCR and R&I, along with the Association of Credit Rating Agencies in Asia (ACRAA), represent regional networks of national champions.

But these alternatives are not a solution. They are an endorsement of the problem.

The existence of AfCRA, Dagong, IIRA, or any other alternative rating agency does not challenge the fundamental logic of the system. It accepts the premise that nations must be “rated” by private entities, that creditworthiness is something to be assigned from above, and that access to capital markets should be mediated by an unelected tribunal of financial gatekeepers. These alternatives seek to be better raters, not to abolish the practice of rating itself. They accept the neoliberal architecture and ask only for a seat at the table—a seat that the incumbents have no intention of vacating.

The Chinese experience is instructive. Dagong was refused permission to operate in the US and was unable to gain regulatory recognition in major Western markets. The Big Three’s dominance is not merely a function of better methodology; it is a function of regulatory capture, network effects, and the structural power of the US financial system. An African agency, no matter how well-intentioned, faces the same barriers. It will be dismissed as “politically motivated” or lacking in “credibility”—the same charges levelled against Dagong—while the Big Three’s partisan judgments are treated as objective truth.

Conclusion: Reform Is Not Enough

The alternatives are a comfort blanket. They allow us to believe the system can be reformed, that we can have “fair” ratings if only we build enough alternative institutions. This is a fantasy. The system is not broken because it lacks diversity among raters. It is broken because the very act of rating—the assumption that three private agencies should have the power to determine a nation’s borrowing costs and fiscal space—is illegitimate. It is broken because the global financial architecture is not even-handed but is the product of colonial extraction, capitalist imperialism, and the subordination of the Majority World.

The rating agencies exercise political influence without elections. They make judgments that shape the lives of billions. They determine whether a country can afford hospitals, teachers, or climate adaptation. They do so with no accountability, no democratic legitimacy, and no recognition that their methodologies are saturated with colonial assumptions and racialised biases. The $75 billion figure is not the cost of a technical flaw. It is the price of a system built to extract from the Majority World.

The alternatives are not a challenge. They are a concession. AfCRA, Dagong, IIRA—they mitigate the worst excesses of the current system. But they are adaptations to a system that should be dismantled, not reformed.

We do not need African credit ratings. We do not need Islamic credit ratings. We do not need Chinese credit ratings. We do not need any credit ratings. At least not ratings that carry the force of law, that determine the fiscal space of sovereign nations, that are handed down by private agencies accountable to no one.

We need to decolonise global finance. We need a system where borrowing costs are not determined by three private agencies in New York and Washington, but by democratic deliberation, international solidarity, and recognition of historical injustice. We need to shift from a logic of creditworthiness—which is always a logic of exclusion—to a logic of solidarity.

That is the project. Not better rating. Not reform. Dismantling is the project.