The government has expressed disappointment in the latest report by Standard and Poor’s (S&P) Global Ratings released last Friday, which downgraded Ghana’s foreign and local currency ratings from ‘B-/B’ to ‘CCC+/C’ with a negative outlook. However, it has also said that it was confident the economy would bounce back stronger in the shortest possible time.
The Ministry for Finance, Ken Ofori-Atta, issued the government’s official response yesterday on the S&P downgrades of Ghana on the back of intensifying financing and external pressures.
“The government is committed and confident that it will successfully emerge from these challenges in the shortest possible time as we have demonstrated the track record to do so in the Akufo-Addo led government,” the statement said.
S&P is reported to have said that its negative outlook for the country was “reflecting Ghana’s limited commercial financing options, and constrained external and fiscal buffers,” Market Watch, a US based financial information website, published.
The Covid-19 pandemic and the conflict in Russia had magnified Ghana’s fiscal and external imbalances, S&P said. The website further reported that the demand for foreign currency had been driven higher by several factors, including non-resident outflows from domestic government bond markets, dividend payments to foreign investors and higher costs for refined petroleum products.
According to S&P, Ghana had also been affected by a lack of access to Eurobond markets.
S&P acknowledged the passage of the E-Levy and the implementation of other revenue measures, but notes: “While these changes could improve the tax take going forward, the situation remains challenging, and over the first half of 2022, the fiscal deficit has exceeded the government’s ambitious target.”
It would be recalled that in February, S&P had affirmed Ghana’s ratings, as Moody’s downgraded the nation to Caa1 with a stable outlook.
GOVERNMENT
In its response, the Ministry of Finance said: “The government is disappointed by S&P’s decision to downgrade Ghana despite bold policies implemented in 2022 to address macro fiscal challenges and debt sustainability which have been significantly exacerbated by the of these global external shocks on the economy.”
However, the government said it would continue to be proactive in addressing the impact of these external and domestic headwinds on the economy and on the lives and livelihoods of Ghanaians.
The government has implemented key revenue and expenditure measures, including the 30% cut in discretionary expenditures.
Meanwhile, the government laments that, “the delays in the passage of key revenue measures introduced in the 2022 budget affected revenue performance in the first half of the year. However, all the revenue measures introduced in the 2022 budget, including the review of the MDA fees and charges bill, the tax exemption bill, the E-Levy bill, have all now been promulgated by Parliament. These fiscal measures are now in full implementation mode to support our fiscal and debt sustainability policies.”
IMF ENGAGEMENT
Concluding its response, the government said that its engagement with the International Monetary Fund (IMF) for a programme, incorporating its Enhanced Domestic Progam (EDP), is expected to support its drive to restore and sustain macroeconomic stability, among others.
PRESIDENT’S ASSURANCE
In a related development, President Akufo-Addo is confident that the Ghanaian economy would bounce back strongly from the ravages of the COVID-19 pandemic, which had been exacerbated by the effects of the Russian invasion of Ukraine.
The President was speaking on the recent economic challenges that are confronting the nation in an interview on North Star Radio, in the Northern Region yesterday.
He indicated that when he took office in January 2017, he inherited an economy that was under an IMF Programme, and recalled that his government was able to exit successfully, in 2019.
He mentioned that regardless of the IMF programme started by the erstwhile Mahama government, his administration implemented flagship programmes like the Free SHS policy and 1-District-1-Factory initiatives, and grew the economy at an annual average growth rate of 7% from 2017 to 2020.
“Just as we were able to go through this COVID-situation, I am confident (that we will go through these current difficulties). Let me repeat it, that this government, based on the policies that we have implemented, will find a way to bring our economy back to a better place,” he assured.
