Rating agency, S&P Global Ratings, Friday, September 14, 2018 raised the country ’s sovereign credit rating to ‘B’ from ‘B-’.
The agency also assigned a stable outlook to Ghana’s economy.
The Director of Finance Markets at the Bank of Ghana, Mr Steve Opata, announced this Saturday on Joy FM/MultiTV’s news analysis programme, Newsfile.
According to Tradingeconomics.com, the main driver behind the upgrade is S&P’s assessment that Ghana's banking sector stability and monetary policy effectiveness which has improved and will support the credibility of the inflation-targeting framework over the period.
Moody's credit rating for Ghana was last set at B3 with stable outlook. Fitch's credit rating for Ghana was last reported at B with stable outlook. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the creditworthiness of Ghana thus having a big impact on the country's borrowing costs.
S&P have revised Ghana’s transfer and convertibility (T&C) assessment to 'B+' from 'B'.
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 a high stock of public sector debt.
“We could lower our ratings if Ghana's economic growth is significantly lower than we expect and if its policymaking effectiveness were to weaken, for example if fiscal deficits were to be materially larger than our expectations. We could consider raising our ratings if Ghana implements and adheres to measures that materially alleviate pressures on public finances and reduce public debt levels beyond our expectations. We could also see prospects for an upgrade if the current account deficit narrows faster than we expect and external debt and gross external financing needs are significantly reduced” - the report indicates.
In justifying the rationale for the new upgrade, the report stated among others that “Having peaked at a seven-year high of 19.2% (year-on-year) in March 2016, headline inflation has continued to decline to 10% by mid-year 2018, supported by a relatively tight monetary policy stance. In our view, the Bank of Ghana's (BoG) policy rate has also been fairly effectively transmitted through the financial system to market participants.
"The government's recapitalization of the banking system in 2018 is a fiscal expense weighing on our fiscal assessment, but should ultimately strengthen the banks and allow them to support financial intermediation in the economy.
"The ratings are supported by our monetary policy assessment and our view of Ghana's fairly robust economic growth prospects. The ratings remain constrained by weak public finances from both a stock and flow perspective, sizable contingent liabilities, the country's low GDP per capita, and high external debt levels,” the S&P report said.
Watch Mr. Opata's submission about the cedi's performance and the economy generally.
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