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Government disappointed with S&P downgrade, addressing economic challenges

BY: Kweku Zurek
Government disappointed with S&P downgrade, addressing economic challenges

The government has expressed disappointment with the downgrade of Ghana’s foreign and local currency from ‘B-/B’ To ‘CCC+/C’ with a negative outlook by S&P Global Ratings (previously Standard & Poor's and informally known as S&P).

The credit ratings agency said the negative outlook reflects "Ghana’s limited commercial financing options, and constrained external and fiscal buffers.”

The S&P downgrade means currently the country is vulnerable to nonpayment and dependent on favourable business, financial and economic conditions.

S&P also indicated that the COVID-19 pandemic and the Russia-Ukraine have impacted Ghana’s fiscal and external imbalances.

“Demand for foreign currency has been driven higher by several factors, including nonresident outflows from domestic government bond markets, dividend payments to foreign investors and higher costs for refined petroleum products,” it said.

S&P also added that Ghana’s inability to access Eurobond markets has affected the economy.

Reaction

The Ministry of Finance in a statement issued on August 8, 2022, assured that the 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.

"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 statement said.

"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.

"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".