Moody’s Investor Service says that the country’s rating of B1, negative outlook, is constrained by the ongoing weakness in the government’s fiscal position due to ongoing spending overruns on the public-sector wage bill, high interest costs, and the clearance of payment arrears.
These factors are partially offset by the economy’s robust growth potential, supported by its abundant natural resources.
The rating agency’s report is an update to the markets and does not constitute a rating action.
Moody’s says that additional constraints to Ghana’s B1 rating include delays to fiscal consolidation plans and the government’s recent decision to impose currency controls and hike interest rates.
Other factors weighing on Ghana’s credit worthiness include the government’s deteriorating debt trend, with the debt-to-GDP ratio forecast to reach 51.2% of GDP by end of 2014, and the intensification of domestic financing pressures.
Domestic debt-servicing costs in 2013 were almost 40% above the government’s budgeted level and now consume 20% of government revenues.
Ghana is also susceptible to a degree of external economic shocks — reflected in the elevated external vulnerability measures, notably in the form of a large current account deficit and low foreign-exchange reserves.