Ghana is once again disappointed to be sanctioned by international rating agencies for challenges that do not depend on its leaders’ ability to manage the economy, while a new rating from Fitch Ratings continues the negative series.
The Ghanaian Ministry of Finance said “disappointed by S&P’s decision to downgrade Ghana’s rating despite the bold policies implemented in 2022 to address macroeconomic challenges and ensure debt sustainability, greatly exacerbated by the impact of these global external shocks on the economy”
In a note published on 6 August, the American Credit Rating Agency estimated that Ghana’s efforts to reduce its deficit position were insufficient to restore balance to its debt. Among other things, its analyses are based on the fact that the country’s borrowing costs are increasing rapidly, while economic growth is moving at a slower pace, which contributes to further degrading the debt-to-GDP ratio.
The situation provokes a second disagreement with Ghana, which has hitherto been a respected issuer of debt on the international capital market. The country’s first speculative rating was given by Moody’s, whose analysts also doubted the country’s ability to repay its debt. Following S&P Global Ratings, Fitch Ratings, which on 10 August also estimated that Ghana’s public debt was “speculative”.
The country is indeed facing macroeconomic challenges, but upon analysis, a large part of these challenges are international in nature and the government has little means to intervene. Even if inflation, which is eroding the purchasing power of households and therefore the country’s growth, reached 29.8% at the end of June 2022, it is important to note that this difficulty is partly due to US monetary policy. which struggles to control its own inflation and leads to a rise in the dollar, impacting exposed countries such as Ghana.
A similar reasoning can be applied to the depreciation of Cedis, which reinforces the effects of inflation and the ability to honour international commitments. Ghana’s central bank is running out of options, after raising key rates to historic levels. The severity of the opinions issued by the rating agencies will not fail to make more than one leader in Africa think.
Many countries that have shown strong resilience during the most challenging times of Covid-19, and continue to resist negative external factors, are at risk of being deemed “speculative” for challenges that do not depend on their domestic policies. This situation could lead to even greater difficulties in accessing capital markets for a continent which sometimes requires a budgetary orthodoxy that is not always found in developed countries, They are considered to be more reliable, and yet they have been at the root of the biggest crises of the last decade, not to mention the global warming for which they are largely responsible.
Source : Agence Ecofin / Par Idriss Linge