Global rating agency, Standard & Poor’s (S&P), has cited continuous uncertainty surrounding fiscal correction, including the delayed approval of the e-levy bill to give assurances to the 2022 budget, as one of the key risk factors that prevented an upgrade of Ghana’s Sovereign ratings.

In its latest report on Ghana, S&P Ratings affirmed Ghana’s Long and short-term foreign and local currency ratings at B- and maintained the outlook at Stable.

S&P ratings explained that the decision to maintain Ghana’s ratings at B- with a stable outlook was predicated on several factors, including Ghana’s solid growth prospects with real GDP growth averaging 5.0 percent over the period 2022-2025 and the relative transparent and responsive political system. In addition, S&P acknowledged that Ghana’s economy is one of the most open economies in Africa.

The decision by S&P to maintain Ghana’s ratings at B- with a stable outlook underscored its broad recognition of the challenges to the global economy due to the COVID pandemic and the long road to recovery facing the global economy.

Response from Ministry of Finance

In response to the rating by S&P, the ministry of finance, which appeared to be satisfied with the ratings, highlighted in a statement that amidst the global challenges, S&P’s assessment on Ghana “reflects the resilience of the Ghanaian economy and appreciation of the decisive policies that have been instituted to drive the recovery process”.

The response from the Finance Ministry is contrary to how it assessed Moody’s downgrade of Ghana’s Long-Term Issuer and Senior unsecured bond Ratings to Caa1 from B3 with a stable outlook. A statement issued by the Ministry of Finance earlier this week said: “The Government of Ghana is therefore completely puzzled by the decision to downgrade Ghana’s credit rating to Caa1, despite the series of progressive engagements we had with the team from Moody’s”.

In its recent ratings, S&P took notice of the recent policy announcement by the government to further cut expenditure by 20% to reinforce the fiscal consolidation process. In its view, this measure will help to ensure fiscal sustainability and stabilize debt but “may slow down growth in the short term”.

S&P projects that with these measures, growth will then pick up again in 2023 and thereafter. Moody’s however, believes “such an unprecedented fiscal tightening will be socially, economically, and politically challenging to implement”.

In its own assessment, S&P is confident that the fiscal measures planned for 2022 and beyond should result in a faster consolidation of the fiscal metrics than previously envisaged, including stabilization of the public debt trajectory.

Other risk factors

Aside the continuous uncertainty surrounding fiscal correction, the S&P report identified some other constraints that prevented an upgrade of Ghana Sovereign ratings. The other concerns include high-interest cost and greater dependence on domestic financing sources given the worsening external financing conditions facing Ghana.

The Ministry of Finance however, re-assured that government remains committed in its fiscal consolidation efforts.

“Going forward, the government remains fully committed to restoring fiscal rectitude in public finances. The recently announced expenditure rationalization measure to decisively strengthen fiscal consolidation of the 2022 budget underscores the government’s resolve to address critical concerns over the economy, create jobs for the youth, obtain a positive primary balance and stabilize debt”.
Ministry of Finance

The Ministry of Finance emphasized that Government of Ghana is optimistic about the future and Ghana’s solid growth prospects, as highlighted by S&P, and remains committed to its fiscal consolidation agenda.

Giving hope to Ghanaians, the Finance Ministry guaranteed that “we remain absolutely confident in our resolve, in line with the President’s vision, to build a strong, resilient and prosperous entrepreneurial nation of a Ghana Beyond Aid”.