Professor Osei-Assibey, a senior lecturer at the Economic Department of the University of Ghana, Legon has described the Fitch’s report on Ghana’s economic outlook as “a little bit harsh” and as such advised the government not be worried.
The senior lecturer was reacting to the recent Fitch Rating’s revised Outlook on Ghana’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from B to B negative. According to him, the COVID-19 pandemic has eroded the gains made by the government and has also disrupted the foundation of the economy.
“In my view, I think the report has been a little bit harsh on government, if you read it in its entirety, it makes a point that government fiscal consolidation has slowed and for that reason the negative outlook. Of course, they have done same to many countries across the globe even including countries like UK and others which have experienced some downgrade”.
Prof Osei-Assibey
Prof. Osei-Assibey however, opined that the shock emanating from the pandemic isreally very deep as it shook the entire foundation of the economy. He indicated that countries need time to recover from this shock. According to him, “not until the recovery is fully materialize, I do not think that fiscal consolidation is more important.”
Furthermore, he asserted that the pandemic has resulted in the country spending more coupled with a fall in revenues. He however, admitted that such a phenomenon is not new to Ghana and therefore not a cause for concern.
“We all know where we are coming from after the pandemic which actually led to drastic fall in revenue and the ramp up in expenditure as a result of COVID-19 related expenditures. This is not new to Ghana, it’s not something that is unique to Ghana; all over the world today countries are actually experiencing a very fast growth in fiscal deficits, largely because of the destructions caused by COVID-19. And therefore for me, I don’t think it is cause for alarm, because obviously government need time to recover from this shock”.
However, Professor Osei-Assibey urged the government to continue using policies to support businesses until they fully recover from the pandemic.
“I think that government should still continue to use fiscal and monetary policies to support businesses until such a time we experience full recovery then it will begin to commit more resources to fiscally consolidate. And so the whole idea that the fiscal consolidation has slowed just at the time when we are recovering from this pandemic I do not think is a fair assessment of the situation”.
Prof Osei-Assibey
Meanwhile, Fitch said the revision of Ghana’s outlook to negative reflects the significant deterioration in public finances stemming from the COVID-19 pandemic. Another reason cited was the delays in government’s fiscal consolidation efforts, which reduce Ghana’s ability to absorb further shocks for an extended period.
Fitch however, noted that Ghana’s debt affordability metrics will remain markedly weaker than rating peers over the rating horizon.
Meanwhile Fitch also observed that, public finances remain the key rating weakness for Ghana
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