Ghana’s economy is recovering from effects of the pandemic faster than its peers
Two Credit Rating Agencies – Moody’s Investor Services (Moody’s) and Standard and Poor’s (S&P) – affirmed Ghana’s Credit Rating at B3 and B- respectively. The Rating Agencies also maintained Ghana’s outlook.
In making their decision, the credit rating agencies considered Ghana’s improving growth prospects, resilient external sector performance, and continued access to the capital markets [domestic and international] as essential factors in maintaining the rating and outlook. Notably, the two rating agencies recognised the efforts of government to ‘build back better’ through the innovative Ghana CARES (Obaatanpa) programme.
Furthermore, both credit rating agencies (Moody’s and S&P) acknowledged that Ghana’s economy is recovering from effects of the pandemic faster than its peers; hence the need to focus more on growth and implementation of the Ghana CARES programme.
S&P in particular maintained Ghana’s rating on the back of growing economic prospects and the relatively transparent and responsive political institutions. The stable outlook balances risks from fiscal and external financing pressures against the country’s medium-term economic growth prospects.
Understandably, both credit rating agencies raised some concerns about Ghana’s debt affordability and levels. Government, however, is committed to debt sustainability and fiscal consolidation. As such, between 2019 and 2021 government has undertaken various liability management measures to proactively reduce the external debt stock and the interest expense burden. As a result, government bought back and retired over US$900m worth of Eurobonds, which has reduced the external debt stock significantly.
“On the domestic front, government continues to conduct active liability management. This year alone GH¢4.84billion has been used for domestic liability management, which involves the buy-back of 3-yr and 5-yr bonds. This has reduced the refinancing and rollover risks and interest cost inherent in the public debt portfolio. Our strategy has also positively impacted the interest rates on the primary and secondary securities markets,” said a Ministry of Finance statement issued in Accra yesterday
The Ministry of Finance assured the general public that government is doing its best to vaccinate the majority of adult Ghanaians in order to achieve herd-immunity – a need that has become even more imperative with the seeming third wave upon us. To this end, Ghana is in constant talks with the African Vaccination Acquisition Trust (AVAT) for the supply of 17 million Johnson and Johnson doses. Ghana is among the 27 African countries which have made the initial deposit and completed the legal requirements, readiness checklist and emergency use authorisation required. The first batch of the vaccine is expected this month under the programme.
As previously stated in numerous publications and media interactions, the primary aim of the government of Ghana – especially during onset of the pandemic – was to save lives and livelihoods. As such, government has implemented various life-saving initiatives and interventions in 2020/21 to protect the general population against the pandemic’s adverse social and economic effects.
These interventions led to significant unbudgeted expenditures and elevated debt levels. However, Ghana’s economic fundamentals remain strong despite these interventions, and recovery prospects are high. This is reflected in the positive narrative by both rating agencies and other organisations, such as the IMF, as to how well Ghana has managed its economy under the pandemic.
In addition, Ghana’s medium-term plan is underpinned by a robust strategy to safeguard growth beyond 5% over the medium-term; return to the fiscal path of under a 5% of GDP fiscal deficit; and attain a positive primary balance by 2024. We will sustain our progress and accelerate this through the GH¢100billion Ghana CARES transformation programme within the general policy framework of Ghana Beyond Aid, and certainly beyond the pandemic.