I learned from my banking experience that the first question that should be asked to the loan applicant is to determine the sources of his income, and how the loan will be repaid? What applies to individuals applies to companies, banks and countries.

Before the bank invests its money in another country or lends it to a foreign company, it must know the reality of its ability to pay, and due to the limited capabilities of many countries and banks in knowing all this, they resort to credit rating agencies to obtain information.

The issue of borrowing is of high importance in the capitalist world, which is complex and wide, being the backbone of the system, so there is a need to organize the world of debt and create institutions, local or global, that can ask and research, even intelligence, and determine the solvency of the debt seeker or the debtor next, and his ability to pay regular installments, or repaying the entire debt on time so that the lending bank or the lending country would not be surprised that whoever borrowed from it has no ability to repay the debts.

Credit Rating Agencies publish their reports about banks, major companies or countries, which is the most important and sensitive aspect as their reports result in positive or negative situations regarding a country’s ability to borrow from the international market, the direction of investments, or the interest rate which is calculated on its loans.

The higher the risk is, the higher the interest rate will be similarly as the insurance policy as the higher the risk, the higher the insurance premium.

The risks of lending to countries relate to issues such as political and security stability, the impact on the economic situation, the ability to repay debts, in the short and long term, the country’s repayment record, and so on.

Credit rating companies verify their income from the contributions of countries and financial institutions in return for providing them with detailed information of a confidential nature and very close to the truth.

Companies and countries improve their position based on the reports of rating institutions to be worthy of international trust.

Three giant American institutions control 95% of the market for issuing credit reports on institutions and countries, namely Moody’s, Standard & Poor’s, and Fitch, and almost all of them are more than 100 years old but did not gain their importance until 50 years ago when the New York Stock Exchange recognized their usefulness and credibility in 1975 and imposed their existence because of the need for their services.

The currencies of many countries rise or fall based on the reports of these agencies, in addition to the flow of investments into or out of a country.

Credit rating agencies’ reports are supposed to be technical and impartial, but practice has shown that some of these reports, at times, were politicized, and were issued at the will of major powers.

There are also agencies for grading the level of universities, others for evaluating the level of hotels and their guests’ satisfaction with them, and others for restaurants, in addition to agencies that monitor the level of freedoms in countries of the world, press freedoms, the degree of transparency and the degree of corruption, and other activities that require classification and monitoring, no matter how doubts are raised about the integrity of some of these agencies or their subjection to blackmail and the possibility of purchasing them, they remain better than nothing due to their undeniable capabilities to read the future and predict what the economic conditions will be in the future.

Our government’s disregard for the reports of international agencies does not mean that they are incorrect, or that their behavior is correct.

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By Ahmad alsarraf