Ghana's economy in dire situation than Gov't admits – Casely-Hayford

Ghana’s economy is in much deeper crisis than officialdom wants to admit, financial analyst Sydney Casely-Hayford has told Kweku Obeng Adjei on the Starr Midday News.

Casely-Hayford’s assertion follows a recent downgrading of Ghana’s economy to B3 by Moody’s.

“If you read the detailed statement that Moody’s has put forward, there isn’t one single glimmer of hope that anything will come to change the situation except if the international prices of gold and cocoa [increase], if the oil prices [go] up and if domestic interest rates can come down,” Mr Casely-Hayford said.

“Each one of those particular pillars or forecasting are clearly going against Ghana and so there isn’t anything that we can comfortably say that at least we have this one thing that might enable us to turn the issues around.

“My analysis tells me that the situation is a lot direr than what we have and I also do think that the debt to GDP ratio of 67 percent is understated. I think it should be closer to 74, 75 percent and based on that I’m very concerned that we are not painting the picture as it it…and if you look at what is happening with the energy sector and power sector with the possibility that we might still have the ‘dumsor’ issue being with us throughout the year and possibly into next year, I think that we are in deeper crisis than we are trying to put out…I think Government should be concerned and transparent enough to come out to admit that this is a very very dire situation,” he added.

Ghana had its credit rating cut by Moody’s Investors Service after the West African nation warned that tumbling oil prices will worsen its government budget deficit.

The sovereign’s foreign-currency rating was lowered one step to B3, six levels below investment grade, Moody’s said Thursday. The outlook on the grade is negative. Standard and Poor’s assesses Ghana at an equivalent B-, while Fitch Ratings has it one grade higher, at B.

The move was the second downgrade by Moody’s in less than a year for a nation that’s seeking a $1 billion loan from the International Monetary Fund. The second-biggest economy in West Africa is struggling to rein in inflation and grappling with a sliding currency that’s the continent’s worst performer so far this year.

“The negative outlook reflects further downside risk to the country’s debt dynamics and liquidity pressure in the short-term if the country’s policies fail to successfully contain its fiscal deficit, stabilize its currency and address current impediments to higher economic growth,” Moody’s said.

The IMF has pledged to help bolster Ghana’s currency, the cedi, on condition the government reduces spending on salaries of civil servants.

Finance Minister Seth Terkper said in a speech to parliament last week the budget deficit will be wider than previously projected because a decline in crude prices has hurt revenue. The target for this year is 7.5 percent of gross domestic product, instead of 6.5 percent forecast in November, Terkper told lawmakers. Ghana became an oil exporter in 2010.

The government doesn’t have money to fuel power plants, which since December has led to planned power outages that last as long as 24 hours in the capital, Accra. Inflation accelerated to 16.5 percent in February.