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Business News Mon, 8 Aug 2022

Hasten fiscal consolidation efforts to restore credit downgrades – Economist

Economist, Courage Martey has called on government to hasten efforts aimed at improving the country’s fiscal consolidation position in the short to medium term.

The call comes on the back of international ratings agency, S&P Global Ratings pushed Ghana's debt situation further into speculative territory, lowering its foreign and local currency sovereign ratings to CCC+/C from B-/B with a negative outlook.

Reacting to the development, Courage Martey said moves to hasten Ghana’s fiscal consolidation path will restore the current downgrades from some rating agencies.

“There are a number of things that need to be done for us to get an upgrade. It significantly hinges on rebuilding fiscal and external buffers because that has been the main point of concern for investors. There must be an improvement in our fiscal deficit position. Now, if you look at the S&P statement, for instance, they essentially considered the need to record a primary surplus equivalent to 2% of GDP,” the economist told Citi Business News.

“That is a tall order though government has already signalled that it is working to record a primary surplus equivalent to 0.4 worth of GDP. We are not far from the direction that the fiscal situation should be heading, except that it is moving slower than the rating agencies would anticipate. Thus, government should be able to quicken the pace of fiscal consolidation. That would be good news towards, reinstating us back above the current downgraded levels we have found ourselves in,” he added.

Meanwhile, the current downgrade by S&P Global Ratings further threatens Ghana’s debt sustainability efforts, with many investors demanding a higher credit risk premium.

The downgrade will further increase the country’s cost of borrowing and servicing existing debts.

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Source: www.ghanaweb.com
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