S&P's downgrade of Ghana unfair, disappointing - Economist

Emmanuel Amoah Darkwah121 Chartered Economist, Emmanuel Amoah Darkwa

Wed, 10 Aug 2022 Source: rainbowradioonline.com

Chartered Economist, Emmanuel Amoah Darkwa, has sided with government over its response to the downgrade of Ghana by rating agency, S&P.

The government of Ghana had earlier said it is disappointed by S&P’s decision to downgrade the Ghanaian economy despite some “bold policies” it has implemented in 2022 to address macro-fiscal challenges and debt sustainability.

On August 5, 2022, Standard and Poor’s (S&P) global ratings downgraded Ghana’s foreign and local credit ratings from B-B’ to CCC+C with a negative economic outlook.

According to S&P, the downgrade is due to intensifying financing and external pressures on the economy.

But the Finance Ministry in its response posited that the country was disappointed with the recent rating.

The Ministry said the government despite the impact of global external shocks on the economy, has taken some proactive measures to revive the economy.

It added that, "some key revenue and expenditure measures, including the 30% cut in discretionary expenditures, have been implemented”.

In his opinion, Mr. Amoah Darkwah explained that the rating is not only disappointing but unfair to Ghana.

He said he was personally disappointed because there is a problem we all know that S&P failed to recognise.

He noted that the government has managed to revise its macroeconomic targets in the mid-year budget review.

"For once, let me side with the government statement. I am personally disappointed because we are aware of the existing problems. What has the government done to solve the problem? They have been able to revise the macroeconomic targets in the mid-year budget review, so if you downgrade the government, it means that the efforts adopted to resuscitate the economy, you [S&P] did not appreciate that.”

He said ratings are down on outlooks, and for example, "government anticipated that the implementation of the E-levy would have generated Ghc7 billion, but in the first four months, the implementation stalled, and the targets reviewed downwards.

For him, S&P has not been fair to the government of Ghana because the timing of the rating and the policies currently in place, should have seen the previous rating maintained.

The effect of the rating

He warned the rating could influence the decision of people to withdraw from the bonds we are trading on the international market.

He said "the downgrade of Ghana means that our bonds are on the capital market; people might want to go out of those bonds, and when this happens, you would have to pay them. And if you are unprepared, you would have to spend a lot of money to amortize those debts, it will create several problems for the fiscal space of Ghana.”

He challenged African countries or emerging countries to look at what they could do internally to address the issue of credit ratings, saying, ”who are the beneficiaries of these credit ratings? The foreign investors are not from emerging countries, and they are the ones who would benefit from these ratings”, he told the host of Frontline on Rainbow Radio 87.5Fm, Kwabena Agyapong.

Source: rainbowradioonline.com
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