Downgraded, but fiscally robust

The credit rating agency, Fitch, on October 17 changed Ghana’s sovereign credit rating to ‘B’ with stable outlook from B+ with a negative outlook.

The verdict was informed by factors such as what the agency claims is the failure on the part of the government to fully implement its fiscal consolidation plan in 2013.

The government continued to overrun on wages, interest costs and arrears, leading Fitch to expect that the government will fail to meet the nine per cent of GDP fiscal deficit target for this year. However, the decision to sharply increase utility tariffs and scrap fuel subsidy reduces the risk of an overrun in the coming fiscal years.

The agency also says Ghana's external vulnerability has increased since the rating was last reviewed in February 2013. It forecasts that lower gold prices and strong import demand will put further pressure on external balances.

Fitch expects the current account deficit to widen in 2013 over the figure in 2012 and does not see capital inflows keeping up pace with the widening current account deficit to tame foreign reserves.

The Minister of Finance has, however, responded appropriately to the country’s ‘B’ rating accusing Fitch of ignoring a chunk of the measures and results currently taking place.

First, the country’s macroeconomic targets are medium-term and not a one-off target achievable in 2013.

According to the minister, progress in fiscal consolidation after last year’s deficit was good. It is part of the necessary steps to address long-standing issues that have plagued the country.

The government working within a weak global economic environment that has recently resulted in significantly lower gold and cocoa prices. A year-long power shortage also slowed productivity by the private sector

The Graphic Business thinks that while the economy may be facing challenges, it is equally important to note that efforts instituted to salvage the situation are holding.

The government is pursuing a new debt strategy, fiscal discipline, streamlining the quality of spending and introduced fiscal measures to rake in more revenue through taxes. These are initiatives that should give a positive outlook to the economy.

The GRAPHIC BUSINESS urges the government on to religiously follow the measures it had outlined in the 2013 budget to reverse the hazy economic outlook.

The private sector should also be supported to drive industries and create the needed jobs to crank the economy.

It is the view of the paper that the government would take the new ratings in its stride and work harder for the unfavourable rating to be reversed.

Graphic Business/Ghana