Ghana’s B rating likely to increase borrowing – Prof. Gatsi

The recent upgraded credit rating from a B- to a B by Standard and Poor’s (S&P), following their recent assessment of the economy, could deepen the quest to borrow further, An Economist, Prof. John Gatsi has said.

Though the rating has given Ghana a stable outlook, for the first time in almost a decade, Prof. Gatsi explained that it only indicates to the investment community, our ability to pay back loans as potential borrowers.

The rating he noted, further gives indications to borrowers whether they have the possibility of obtaining credits at relatively cheaper costs.

Speaking to the Goldstreet Business, Prof. Gatsi said, “It is not to indicate whether our human development indices are good or bad, whether the economy is generating the needed employment or whether is it providing the needed opportunity for entrepreneurs to engage in productive activities nor does it affect the level of inflation in relation to a moderated price development.”

“It’s a good rating because investors and creditors may be lending money to Ghana and the country is likely to borrow at relatively cheaper cost but that call for no extreme jubilation,” he added.

In September 2016, Moody’s gave similar rating with same outlook while in May 2017, Fitch also gave Ghana same rating and outlook.

Since Fitch’s rating last year, the exchange rate has till date been experiencing volatility, with prices of goods being affected. Fuel prices have consistently increased, the latest being September 16, 2018.

Just at the time people are happy about the rating, fuel prices have been increased to the dismay of citizens, and coupled with the current erratic nature of the exchange rate.

The rating report indicates that S&P is likely to downgrade Ghana if the country is not able to deal with its high public debts as well as expenditure and revenue performance.

At the time S&P is writing its report, Ghana has not yet added the debt accumulated by government from May ending to September.

“We have not added the cost of managing the bank crises which the Finance Minister said is beyond GHS8 billion but the President has indicated that the cost is estimated at GHS12.7 billion. That is why managers of the economy must focus on indices that will trigger growth rather than the rating.” Prof. Gatsi said

S&P noted that the upgrade reflected its assessment that Ghana’s monetary effectiveness had improved, albeit from a low base, and will support the credibility of the inflation-targeting framework over the period, adding that “the stable outlook balances Ghana’s fairly robust growth prospects, decreasing inflation, and narrower current account deficits against risks from still-high budget deficits and high stock of public sector debt”.

The statement said efforts to achieve this upgrade had been futile for almost a decade as economic downturns and volatility in outcomes had persisted for some time, while public debt dynamics increased consistently since 2006.

S&P has been rating Ghana since 2003. At the time, Ghana achieved a B+ with a stable outlook. Ghana maintained this rating bill till December 2008 when Ghana’s stable outlook was revised downward to a negative position.

Ghana is rated by three rating agencies, Fitch Ratings, Moody’s and Standard and Poor’s.