The lowering of Ghana’s sovereign credit rating by Standard & Poor’s is disappointing, but the country’s finance minister said they are committed to breaking out of the current economic slump as soon as possible.
Due to the government’s “limited commercial financing choices, and restrictive external and fiscal buffers,” the ratings agency on Friday cut Ghana’s local and foreign currency credit ratings from B-/B to CCC+/C.
In terms of investment grade, a BBB negative rating denotes the creditworthiness of a corporation. The company must be rated at ‘BBB’ or better by Standard and Poor’s or Moody’s in order for the issue to be regarded as investment grade. Anything with a rating of BBB or lower is not thought to be investment grade.
A debt with a “CCC” rating is now at risk of nonpayment and depends on favourable business, financial, and economic conditions for the debtor to fulfil its financial obligation.
In the meantime, the finance ministry stated in a statement on Monday that “global external shocks” had made Ghana’s deteriorating economic situation worse and that certain revenue-saving measures put in place at the start of the year will soon start to pay off.
The statement stated that despite the daring measures put in place in 2022 to address macro fiscal difficulties and debt sustainability, the government is disappointed by S&P’s decision to downgrade Ghana.
The administration is committed and confident that it will overcome these obstacles in the shortest amount of time feasible since we have shown that we have the track record to do so, the statement continues.
At the beginning of the year, Moody’s and Fitch both downgraded Ghana, which drew criticism from the finance minister Ken Ofori-Atta, who said that foreign rating agencies had an institutional bias against African economies.
The inability of Ghana to access international financial markets since has been partially attributed to the downgrades by the finance ministry and the central bank.
Since the end of last year, Ghana’s central bank has increased its primary lending rate by 550 basis points in an effort to stop the inflationary spiral that hit an 18-year high of 28.9 percent in June. Over the same time span, the cedi’s value has decreased by almost 30%.
Ghana Disappointed Over S&P’s Downgrading & Promises Turnaround
FILE - This Oct. 9, 2011 file photo shows 55 Water Street, home of Standard & Poor's, in New York. Standard & Poor's Ratings Services upgraded its outlook Monday, June 10, 2013, for the U.S. government's long-term debt. S&P cited the government's strengthened finances, a recovering U.S. economy and some easing of Washington's political gridlock. (AP Photo/Henny Ray Abrams, File)