Ghanaians react to S&P B- ratings… economist assures it won’t affect investor confidence

Adnan Adams Mohammed
The most recent ratings of Ghanaians economy and fiscal
stability by internationally acclaimed rating agency, Standard & Poor's
(S&P), have not been welcomed by many Ghanaian economists and the
government.
Already, the Finance Ministry has described the rating as
unfortunate. The Rating Agency had lowered Ghana’s long-term foreign and local
currency sovereign credit ratings to B- from B and affirmed its B short-term
ratings.
A press statement by the ministry said that while it
recognized that the downgrade was widespread, affecting other countries
worldwide, it found it disturbing that ratings agencies would choose that path
at a time when countries, including Ghana, are battling an unprecedented
crisis. But, an economics professor has refute assertions that the rating will
affect investor confidence.
“The agency is doing its job by rating. However, the timing
is not too good, but I believe well-meaning people out there, investors and the
like will look at this rating and understand it within the context of the
pandemic that yes we have been downgraded but within the context of the
pandemic”, Professor Peter Quartey, senior researcher at the Institute of
Statistical, Social and Economic Research reacted.
He noted that, nobody expected an upgrade so it is not
surprising, but it is something that we were all expecting, except that I
believe investors who will see this data will be discerning. We are not in
normal times and it was not just Ghana but several other countries that were
downgraded because of the effects of the pandemic.
The outlook is adjudged stable. The COVID-19
pandemic-related expenditures elevated the fiscal policy stance. This was to
ensure that we save our people and provide relief to many Ghanaians severely
impacted by the pandemic. This was the fundamental reason for the lowering of
the rating.
A review of global credit ratings indicates that lowering of
sovereign credit ratings have affected more than 80 countries and there has
been more than 100 negative outlook revisions for this year.
Most of these credit rating downgrades and negative outlook
revisions are heavily concentrated on the countries who previously were at B/B2
credit ratings.
These adverse rating actions have touched almost all
continents as rating agencies react to the effects of the pandemic on the
global economy.
In Ghana, the primary focus is on saving lives and
livelihoods which may require some temporary fiscal and economic adjustments
including some one-off expenditures. This position was aptly echoed by
President Nana Akufo-Addo in one of his addresses to the nation on the
pandemic…” We know how to bring the economy back to life. What we do not know
is how to bring people back to life.”
The government chose to save lives and therefore instituted
temporary life-saving initiatives and interventions aimed at protecting the
general population against the negative economic effects of the pandemic.
These necessary interventions, which led to significant
unbudgeted expenditures, included subsidies on water and electricity to support
vulnerable households during the lockdown period.
The Government also provided credit to MSMEs whose
businesses were most-impacted by the lockdown. Despite these interventions,
Ghana’s economic fundamentals remain strong, and recovery prospects are high
and this is reflected in the positive narrative on how Ghana has managed the
economy under the pandemic. In addition, Ghana’s medium-term plan has a robust
strategy to safeguard growth.
As at September 7th, our fatality rates have been less than
0.7% as compared to 2.4% for Africa and 3.25% globally. Our recoveries are over
97%, compared to 79.7% for Africa and 71% globally. Our cases as at 10th
September 2020, stood at 842.
As the South African Revenue Services Commissioner recently
argued “Whilst we understand the underlying factors that are pointed out by the
ratings agencies, 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’re down.” We therefore
call on Rating Agencies to seriously consider freezing any rating actions
during global pandemics such as COVID-19. It is very unfortunate that rating
agencies will choose to downgrade our countries in these unprecedented times.
S and P Global Ratings noted the significant positive
developments in the areas of current account position, external reserve
build-up and the unparalleled stability witnessed in interest and exchange
rates. Compared to Ghana’s peers, the GDP growth is still positive, despite the
global crisis.
Going forward, we expect that with the gradual easing of
restrictions, the economy will swiftly rebound and all the one-off expenditures
eliminated. We have a clear path towards the restoration of economic stability
in the short to medium term.
We will sustain our progress and accelerate this through the
GHS 100 Billion Ghana CARES transformation programme within the general policy
framework of Ghana Beyond Aid and certainly beyond the pandemic.
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