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The government laments S&P’s downgrading of Ghana.

The Ghanaian government has stated that it is disappointed in S&P’s decision to downgrade Ghana because, in 2022, it adopted bold policies to address the macro fiscal issues and the sustainability of its debt, which had been significantly exacerbated by the effects of these global external shocks on the economy.

The impact of these local and international headwinds on the economy, as well as on Ghanaians’ lives and livelihoods, would be actively addressed by the administration, according to the government.

On Friday, August 5, S&P Global Ratings made the decision to move Ghana’s debt into speculative area by downgrading its foreign and domestic currency sovereign ratings to CCC+/C from B-/B.

It said its outlook for the country is negative, “reflecting Ghana’s limited commercial financing options, and constrained external and fiscal buffers.”

The Covid-19 pandemic and the conflict in Russia have magnified Ghana’s fiscal and external imbalances, S&P said.

The agency noted that a number of factors, including nonresident withdrawals from domestic government bond markets, dividend payments to overseas investors, and increasing prices for refined petroleum products, have increased demand for foreign currency.

According to the agency, the country has also been hampered by a lack of access to the markets for Eurobonds.

Among other things, local governments have approved laws to limit tax exemptions, notably for VAT, and to impose a fee on electronic transactions.

“While these changes could improve the tax take 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 said.

In February, S&P had upheld Ghana’s ratings while Moody’s had lowered the African country to Caa1 with a stable outlook.

In response, the Ministry of Finance released the following statement on August 8: “On August 5, 2022, Standard and Poor’s (“S&P”) Global Ratings downgraded Ghana’s international and local currency credit ratings from “B-/B” To “CCC+/C” with a negative outlook. S&P claims that increased finance and external pressure on the economy are to blame for the downgrading.

“In arriving at their decision, the credit rating agency considered: (a) the lingering effects of the COVID-19 pandemic and the severe global shock of the Russian invasion of Ukraine on Ghana and the consequent fiscal and external imbalances; (b) elevated gross financing needs in the face of International Capital Market hiatus (c) the limited commercial financing options; and (d) the credible steps taken by Government to fast-track fiscal consolidation and the passage of key revenue bills.

“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.

“Government will 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 delays in the passage of key revenue measures introduced in the 2022 Budget affected revenues performance in the first half of the year. However, 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 added “The Government is committed and is 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 Program (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.”

Disclaimer: The opinions expressed in this publication do not in anyway reflect the opinions of State News Ghana

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