Ghana’s Economy Rated B+

Ghana's robust economic performance, strong growth outlook, good governance record, and favourable business environment have been cited as factors underpinning the country's 'B+' rating by the Fitch Ratings. A statement issued by Fitch Ratings, London on Friday September 21, 2012 “affirmed Ghana's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'B+' with a Stable Outlook and Short-term foreign currency IDR at 'B'. The agency has also affirmed the Country Ceiling at 'B+'”.

The ability to maintain the country's ratings at a ceiling of B+ attests to good governance and demonstrates the capacity of the country to repay external and domestic debt liabilities, thereby, giving confidence to investors accessing sovereign debt opportunities in Ghana. According to the Fitch Rating Statement, Ghana's growth is forecast at an average of 8.6% over the next three years. This growth will be boosted by rising oil production and its positive spillover effects on the economy as well as infrastructure spending.

Reacting to the ratings by FITCH, a statement released by the Ministry of Finance and signed by the Chief Director, Enoch H. Cobbinah on behalf of the Minister, Dr. Kwabena Dufuor, said over the past three years Government has committed itself to significant infrastructural investments in Roads &Transport, Agriculture, Energy, Oil & Gas sectors, among others.

According to the Ministry, the Oil & Gas sector has been identified by Fitch Rating as a major growth pole which will provide diversification of economic activities. Oil production is forecast to rise to 120,000 barrels per day (b/d) in 2013 and is expected to increase further to 600,000 b/d by 2018 according to Ghana National Petroleum Company (GNPC). The monetisation of Ghana's gas which is expected to begin in 2013 will lower the cost of power and improve competitiveness. Oil & Gas revenues would also support the country's public and external balance sheets over the medium term. The Statement noted that the cedi which depreciated by 30% in the first half of 2012 appears to have stabilized due in part to Bank of Ghana's (BOG) policy interventions as well as foreign demand for domestic bond.

“The BOG interventions include (i) reintroduction of BOG bills to provide additional avenues for cedi investments (ii) revision in the application of the statutory reserve requirement of banks to maintain the mandatory 9% reserve requirement on domestic and foreign deposit liabilities in Ghana Cedis only, and (iii) provision of 100% cedi cover for vostro balances” The Statement also notes that the revision of the 2012 fiscal deficit from 4.8% of GDP as provided in the 2012 main budget to 6.7% is occasioned by repayment of arrears, 18% public sector wage increases and increased energy subsidies.

“As the Ministry of Finance and Economic Planning admits to its delight in this rating, it would be pertinent to point out that the revision of the fiscal deficit from 4.8% of GDP to 6.7% of GDP was effected during the year to accommodate emerging challenges and, therefore, could not be considered as a slippage” the statement stated According to the Ministry, it has initiated a number measures to deal with fiscal risk occasioned by the implementation of the Single Spine Pay Policy. These measures include the payroll biometric registration exercise which is aimed at cleaning and updating the database of all public service personnel. Measures have also been put in place to strengthen expenditure management and budgetary control including the commitment from the Presidency to ensure that only budgeted expenditures are accommodated within the 2012 budget appropriation.

“The Fitch Rating identified continued strong growth combined with convincing track record of good macroeconomic management and fiscal consolidation as factors which could put upward pressure on the rating” the statement said in conclusion