Ghana’s credit ratings to improve if govt cuts down expenditure – Economist

Economist, Professor Lord Mensah, believes the country’s credit rating will improve if the government cuts spending and successfully restructures its debt.

Fitch has raised Ghana’s Long-Term Local-Currency Issuer Default Rating from RD to CCC.

The issue ratings on domestically issued local-currency bonds that have not yet matured have also been upgraded to ‘CCC’ from ‘D’.

In response to this development, Professor Lord Mensah stated that the government must seek advice on how to improve the economy in order to have a positive outlook.

“If government will listen and try as much as possible to reduce expenditure, that will improve, probably, the rate we find ourselves in. We can even do better. So, there is always room for improvement. Let’s see what comes out in the coming weeks when we get our external debts restructured and then get the IMF programme which could improve the ratings further.”

Fitch typically does not assign Outlooks to sovereigns with a rating of ‘CCC+’ or below.

According to Fitch, the upgrade of Ghana’s LC-denominated debt follows the completion, effective 21 February 2023, of the domestic debt exchange programme by the Republic of Ghana.

Fitch viewed the debt exchange programme as a distressed debt exchange in a context of heightened fiscal pressures, with interest costs amounting to 54% of revenues in 1H22, and a lack of access to international capital markets.

The issue ratings on local-currency notes issued domestically that had a maturity date of 6 February 2023 and for which the remaining due principal payments were made on 13 March 2023 have been withdrawn given the expiry of these notes.
Meaningless upgrade

But Member of Parliament for Bolgatanga Central and member of Parliament’s Accounts Committee, Isaac Adongo has discredited Fitch’s upgrade.

The Bolgatanga Central lawmaker says there is nothing to celebrate about the upgrade because the reality on the ground is that of hardship and suffering visited on investors and pensioners through the government’s infamous domestic debt exchange programme.

Speaking in an interview on Eyewitness News on Citi FM, Mr. Adongo said that though Fitch thinks Ghana has made some gains with the domestic debt exchange programme, what the government has actually done is postpone the problem of default.

“Fundamentally, there is nothing worthy to celebrate about the upgrade because what they have simply done is deny poor people and pensioners their monies and Fitch is celebrating that as a gain but to the people affected, they will not be happy and will not celebrate such a rating.”