The Government has strongly criticised Standard and Poor (S&P) for its decision to downgrade Ghana, despite the bold policies implemented this year to address macro fiscal challenges and debt sustainability.
It has consequently expressed disappointment over the rating agency’s downgrade, after they have acknowledged that the lingering effects of the COVID-19 pandemic and the severe global shock of the Russian invasion of Ukraine had impacted on Ghana and the consequent fiscal and external imbalances, besides the elevated gross financing needs in the face of International Capital Market hiatus among others.
“The Government is disappointed by S&P’s decision to downgrade Ghana despite the bold policies implemented in 2022 to address macro fiscal challenges and debt sustainability which have been significantly exacerbated by the impact of these global external shocks on the economy,” the Finance Ministry asserted in a statement issued yesterday.
The statement intimated that the government would continue to be proactive in addressing the impact of “these external and domestic headwinds on the economy and on the lives and livelihoods of Ghanaians.”
“Government has implemented key revenue and expenditure measures, including the 30% cut in discretionary expenditures,” the statement noted.
It added that the delays in the passage of key revenue measures introduced in the 2022 budget affected revenues performance in the first half of the year.
However, the statement said all the revenue measures introduced in the 2022 budget, including the review of the MDA Fees and Charges Bill, the Tax Exemption Bill, the E-Levy Bill, have all now been promulgated by Parliament.
“These fiscal measures are now in full implementation mode to support our fiscal and debt sustainability policies,” it asserted.
According to the statement, the government is committed and confident that it will successfully emerge from these challenges in the shortest possible time “as we have demonstrated the track record to do so in the Akufo-Addo-led Government.”
“Our current engagement with the International Monetary Fund for a Programme, incorporating our Enhanced Domestic Programme (EDP), is expected to support our drive to restore and sustain macroeconomic stability; debt sustainability and promote growth and job creation whilst ensuring social protection to achieve our vision of a Ghana Beyond Aid,” it posited.
Last Friday, the American credit rating agency, S&P Global Ratings, downgraded Ghana’s foreign and local currency sovereign ratings from B-/B to CCC+/C.
According to a report by MarketWatch, S&P recorded a negative outlook for the country and argued that the new position is “reflecting Ghana’s limited commercial financing options, and constrained external and fiscal buffers.”
S&P reportedly claimed that the COVID-19 pandemic as well as the Ukraine-Russia conflict have magnified Ghana’s fiscal and external imbalances.
The credit rating agency said there had been a high demand for foreign currency, which is driven by factors including non-resident outflows from domestic government bond markets, dividend payments to foreign investors and higher costs for refined petroleum products.
The report indicated that Ghana had also been affected by a lack of access to Eurobond markets.
The agency said the government had passed a levy on electronic transactions and a legislation to tighten exemptions on tax payments, including for VAT, among other moves to raise local revenue mobilisation.
“While these changes could improve the tax intake going forward, the situation remains challenging, and over the first half of 2022, the fiscal deficit has exceeded the government’s ambitious target,” S&P reportedly stated.
S&P had affirmed Ghana’s ratings in February, as Moody’s downgraded the African nation to Caa1 with a stable outlook.
By Ernest Kofi Adu