S & P Global Ratings, has lowered Ghana’s long-term foreign and local currency sovereign credit ratings to B- from B and affirmed its B short-term ratings with a stable outlook.
The finance ministry in a statement released on Monday, September 14, 2020 stated that the fundamental reason for the lowering of the rating is the elevated fiscal policy stance as a result of COVID-19 pandemic.
According to the ministry, “this was to ensure that we save our people and provide relief to many Ghanaians severely impacted by the pandemic. This was the fundamental reason for the lowering of the rating”.
A review of global credit ratings, according to the ministry, “indicates that lowering of sovereign credit ratings have affected more than 80 countries and there has been more than 100 negative outlook revisions for this year.
“Most of these credit rating downgrades and negative outlook revisions are heavily concentrated on the countries who previously were at B/B2 credit ratings. These adverse rating actions have touched almost all continents as rating agencies react to the effects of the pandemic on the global economy.
“In Ghana, the primary focus is on saving lives and livelihoods which may require some temporary fiscal and economic adjustments including some one-off expenditures. This position was aptly echoed by President Nana Akufo-Addo in one of his addresses to the nation on the pandemic…’ We know how to bring the economy back to life. What we do not know is how to bring people back to life’”, the statement added.
The ministry further explained that, “the government chose to save lives and therefore instituted temporary life-saving initiatives and interventions aimed at protecting the general population against the negative economic effects of the pandemic. These necessary interventions, which led to significant unbudgeted expenditures, included subsidies on water and electricity to support vulnerable households during the lockdown period”.
“The Government also provided credit to MSMEs whose businesses were most-impacted by the lockdown. Despite these interventions, Ghana’s economic fundamentals remain strong, and recovery prospects are high and this is reflected in the positive narrative on how Ghana has managed the economy under the pandemic. In addition, Ghana’s medium-term plan has a robust strategy to safeguard growth”.
The ministry however, expressed worry about the recent ratings which do not take cognisance of the fact that the pandemic has had severe strain on economies as government stepped up to make unbudgeted expenditures aimed at containing the spread of the virus as well as to provide stimulus packages to the citizens.
As the South African Revenue Services Commissioner recently argued “Whilst we understand the underlying factors that are pointed out by the ratings agencies, we think that during such a time of crisis, where the whole world is recalibrating and redefining its economic status, for any downgrades to be issued during this time is like kicking us when we’re down.”
“We therefore call on Rating Agencies to seriously consider freezing any rating actions during global pandemics such as COVID-19. It is very unfortunate that rating agencies will choose to downgrade our countries in these unprecedented times.
“S & P Global Ratings noted the significant positive developments in the areas of current account position, external reserve build-up and the unparalleled stability witnessed in interest and exchange rates. Compared to Ghana’s peers, the GDP growth is still positive, despite the global crisis.
“Going forward, we expect that with the gradual easing of restrictions, the economy will swiftly rebound and all the one-off expenditures eliminated. We have a clear path towards the restoration of economic stability in the short to medium term. We will sustain our progress and accelerate this through the GHS 100 Billion Ghana CARES transformation programme within the general policy framework of Ghana Beyond Aid and certainly beyond the pandemic”, the statement concluded.
