<\/p>\n
The Director of Research at the Institute of Economic Affairs, Dr. John Kwakye, is worried about the effect the latest Standard and Poor\u2019s (S&P) global ratings will have on investor confidence.<\/p>\n
On August 5, 2022, S&P downgraded Ghana\u2019s foreign and local credit ratings from B-B\u2019 to CCC+C with a negative economic outlook.<\/p>\n
According to S&P, the downgrade is due to intensifying financing and external pressures on the economy.<\/p>\n
Touching on what this means for the Ghanaian economy, Dr. Kwakye said \u201cthe latest ratings will have a tremendous impact on our economy. Already, our access to the international capital market has been virtually blocked. This downgrade will further hinder the process of getting access to credit facilities in the next few months.\u201d<\/p>\n
\u201cWe are in a very bad situation,\u201d he added.<\/p>\n
The IEA Director of Research is however hopeful that government\u2019s decision to seek an International Monetary Fund (IMF) bailout will restore investor confidence.<\/p>\n
He expects that negotiations with the IMF will be concluded as soon as possible.<\/p>\n
\u201cI understand the IMF negotiations will take months. The delay won\u2019t help us at all. We should be able to conclude this quickly. This will grant us the needed policy credibility.\u201d<\/p>\n
\u201cI am hoping that we will be able to conclude the negotiations quickly so that we can have some debt restructuring, financial assistance, and policy credibility to regain the trust of investors,\u201d he added.<\/p>\n
S&P Global Ratings said though government has taken steps towards consolidating the fiscal deficit, including the recent passage of the Exemptions bill, high borrowing costs and softening growth make it difficult to put debt to GDP on a downward path.<\/p>\n
After a careful assessment of the economy, S&P also reviewed the country\u2019s economic outlook as negative. The negative outlook, in a statement issued by S&P on Friday, August 5, 2022, reflects Ghana\u2019s limited commercial financing options, and constrained external and fiscal buffers.\u201d<\/p>\n
S&P Global Ratings also noted that the Covid-19 pandemic and the Russian invasion of Ukraine had worsened Ghana\u2019s fiscal and external imbalances.<\/p>\n
Demand for foreign currency has been driven higher by various factors, including non-resident outflows from domestic government bond markets, a lack of access to Eurobond markets, retail dollar purchases, dividend payments to foreign investors, and higher costs for refined petroleum products.<\/p>\n
Currently, the local currency which has seen a sharp depreciation in recent times is nearing \u00a29 to one US dollar.<\/p>\n
It would be recalled that government earlier this year introduced some revenue generation measures such as the E-Levy, the Tax Exemptions Bill, and some cuts in discretionary spending.<\/p>\n
However, S&P notes that while these changes could improve revenue generation going forward, the situation remains challenging.<\/p>\n<\/div>\n