<\/p>\n
Ken Ofori-Atta<\/strong><\/p>\n Government has criticised international ratings agency Moody\u2019s recent downgrade of Ghana\u2019s credit worthiness, saying the action was based entirely on a \u201cdesktop exercise, virtual discussions\u201d and what it believes to be \u201cthe omission of critical data provided.\u201d<\/p>\n Moody\u2019s Investor Services, on February 4, this year, lowered the country\u2019s Long-Term Issuer and Senior Unsecured Bond Ratings to Caa1 from B3 and changed the outlook from negative to stable.<\/p>\n According to Moody\u2019s, the downgrade is due to the \u201cincreasingly difficult task government faces in addressing the intertwined liquidity and debt challenges, pandemic induced revenue underperformance, tight funding conditions on international markets, materially decreasing governance and institutional strength and inflexibilities in the government budget.\u201d<\/p>\n But the Ministry of Finance has discredited the assessment, noting, \u201cWe believe that the recent fiscal consolidation measures as announced by the Finance Minister and the 2022 budget, which is anchored on debt sustainability and a positive primary balance, largely address these concerns.\u201d<\/p>\n Contradictions<\/strong><\/p>\n The ministry, in a statement, indicated that the government was at odds to \u201cunderstand Moody\u2019s assertion of the deterioration of Ghana\u2019s institutional strength given Ghana\u2019s reputation as a beacon of democracy in Africa.\u201d<\/p>\n The statement said Moody\u2019s, in a contradictory manner, justified the \u201cStable Outlook\u201d despite the downgrade to \u201cCaa1\u201d by acknowledging the government\u2019s strong track record in delivering effective fiscal policies and the maintenance of a variety of funding sources.<\/p>\n \u201cThey also acknowledged the institutional strength of Ghana and the dynamic nature of our economy and attractive growth prospects over the medium-term,\u201d the ministry pointed out.<\/p>\n It added that Moody\u2019s admission that \u201cGhana\u2019s institutional framework and dynamic economy remain key credit supports, with economic growth forecasts of around 5% over the medium term\u201d was indicative of \u201cour strong and disciplined pre-COVID fiscal performance that, we are being downgraded due to the efforts we made to recover from the negative impact of the pandemic.\u201d<\/p>\n The statement said prior to the announcement, between January 28 and February 3, 2022, Moody\u2019s team engaged senior government officials at the Ministry of Finance and the Bank of Ghana on various issues.<\/p>\n Neophyte Moody\u2019s Boss<\/strong><\/p>\n It revealed that the Moody\u2019s team was led by Lucie Villa, who is the Lead Analyst on Ghana at Moody\u2019s, with supervision by Matt Robinson, noting that \u201cLucie Villa only recently (beginning of January 2022) took over as the primary analyst covering Ghana for Moody\u2019s.\u201d<\/p>\n \u201cWe are very concerned that Ms. Villa may not properly understand and evaluate Ghana\u2019s deepening credit story since obtaining our first credit rating back in 2003,\u201d the ministry asserted and continued that she had also not visited Ghana since assuming the role and \u201cas such this downgrade, at this critical time, was based entirely on a desktop exercise, virtual discussions and what we believe to be the omission of critical data provided.\u201d<\/p>\n Unfair Assessment<\/strong><\/p>\n The statement said the Government of Ghana was, therefore, \u201ccompletely puzzled\u201d by the decision to downgrade the country\u2019s credit rating to Caa1, despite the series of progressive engagements with the team from Moody\u2019s, the quality of the data supplied, as well as the medium-term economic and fiscal focus of the government, underpinned by key fiscal consolidation reforms such as the policy decision to cut expenditure by 20%, as was recently announced by the Minister for Finance, Ken Ofori-Atta.<\/p>\n Perceptions<\/strong><\/p>\n \u201cPerhaps, this singular action by Moody\u2019s confirms the notion held by many that there is an urgent need for reforms in the conduct of rating agencies, given their ownership structure and the ramifications that their actions have on Sovereigns especially in Africa. The call for rating reform, which was loud during the peak of the COVID-19 pandemic, must be revived as a matter of urgency,\u201d it demanded.<\/p>\n It continued that the sentiments expressed by the South African Revenue Services Commissioner recently that\u00a0\u201cwhile\u00a0we understand the underlying factors that the rating agencies point out, we think that during such a time of crisis, where the whole world is recalibrating and redefining its economic status, for any downgrades to be issued during this time is like kicking us when we are down,\u201d must guide rating agencies in these unprecedented global difficulties facing economies big and small.<\/p>\n The ministry stated that the government shall actively continue to support the global outcry against what it called \u201cleviathan,\u201d remarking that on a regional basis, there is ample evidence that sovereign countries on the African continent, in particular, have suffered more adverse rating actions than any other continent since the pandemic, despite the fact that the impact of COVID-19 has been relatively manageable in Africa.<\/p>\n Bias<\/strong><\/p>\n \u201cWe are gravely concerned about what appears to be an institutionalised bias against African economies in this aspect, as credit rating analysts assume highly conservative postures and low risk tolerance for African sovereign credits with little regard for the adverse impact on the cost and access of financing for African Sovereigns,\u201d it posited.<\/p>\n Appeal<\/strong><\/p>\n The government said it would formally appeal the credit rating decision based on the omission of key material information from the assumptions which drove some of Moody\u2019s forecasts and projections such as the 2022 budget expenditure control measures, 2022 upfront fiscal adjustments and inaccurate balance of payment statistics.<\/p>\n It said the appeal would highlight the appointment of a new primary credit analyst, only four weeks prior to such a major credit rating decision; and the committee\u2019s refusal to consider deferring such a monumental rating action until the analyst had enough time to more fully understand both the quantitative and qualitative aspects of the Ghana credit story.<\/p>\n It added that the conclusions made on Ghana\u2019s Environmental, Social and Governance credentials (ESG) were far-fetched without any supporting quantitative analysis or data, adding, \u201cUnfortunately, Moody\u2019s rejected our appeal and went ahead with the downgrade despite all the concerns raised which we believe, were not factored into their decision.\u201d<\/p>\n Optimism<\/strong><\/p>\n \u201cThe Government wishes to state that it is optimistic about the future as confirmed by other credit rating agencies and remains fully committed to restoring fiscal rectitude in public finances. The recently announced expenditure rationalisation measure to decisively strengthen fiscal consolidation of the 2022 budget underscores the government\u2019s resolve to address critical concerns over the economy, create jobs for the youth, obtain a positive primary balance and stabilise debt,\u201d the statement indicated.<\/p>\n Fitch <\/strong><\/p>\n Recently, rating firm Fitch also corrected what it says was an error in its initial rating of Ghana\u2019s economic outlook saying, \u201cThis is a correction of the rating action commentary published on January 14, 2022.\u201d<\/p>\n The agency, in a statement posted on its website last Friday, indicated that the correction was related to the rating action on Ghana\u2019s senior unsecured debt, which it downgraded earlier.<\/p>\n Fitch Ratings also downgraded Ghana\u2019s Long-Term Foreign-Currency Issuer Default Rating (IDR) to B- from B with a negative outlook, and explained that \u201cthe downgrade of Ghana\u2019s IDRs and Negative Outlook reflect the sovereign\u2019s loss of access to international capital markets in 2021, following a pandemic-related surge in government debt.\u201d<\/p>\n BY Ernest Kofi Adu<\/strong><\/p>\n \n\t<\/div>\n","protected":false},"excerpt":{"rendered":" Ken Ofori-Atta Government has criticised international ratings agency Moody\u2019s recent downgrade of Ghana\u2019s credit worthiness, saying the action was based entirely on a \u201cdesktop exercise, virtual discussions\u201d and what it believes to be \u201cthe omission of critical data provided.\u201d Moody\u2019s Investor Services, on February 4, this year, lowered the country\u2019s Long-Term Issuer and Senior Unsecured […]<\/p>\n","protected":false},"author":1,"featured_media":180405,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[72],"tags":[4092,225,4428,1824],"class_list":["post-981257","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-biased","tag-govt","tag-moodys","tag-rating"],"_links":{"self":[{"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/posts\/981257","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/comments?post=981257"}],"version-history":[{"count":0,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/posts\/981257\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/media?parent=981257"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/categories?post=981257"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/tags?post=981257"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}