Chief Finance Officer of Valley View University, Dr. Williams Peprah
Govt needs to apply well-rehearsed and strategic methods to mobilize more revenue
Weak revenue generation constrains Ghana’s budget flexibility, Moodys
Moody’s downgrades Ghana’s economic outlook from B3 to Caa1
Chief Finance Officer of Valley View University, Dr. Williams Peprah, says the ratings by Moody’s puts Ghana in a worse position than the initial rating by Fitch which gave the country a negative outlook.
Moody’s rating to Caa1 from B3 now means that Ghana’s bond is rated as poor quality and has a default risk.
He said this will mean that Ghana’s accessibility to the international market is now heavily constrained.
“There is a high propensity that Ghana will default. This is even worse when we compare this to the ratings done by Fitch where Fitch put us in the B- category which simply means there’s a high speculative default.”
“So, if you look at Moody’s, it is putting us in a very tight corner. Ghana’s bond is not lucrative now and it means that we cannot go to the international capital markets until we pay high interest or coupon rate to investors. So, this is why they [ratings agencies] are advising that we should go for revenue generation”.
Moody’s said Ghana’s revenue generation is weak, thus heavily constrains its budget flexibility and tight funding conditions on international markets.
Dr. Peprah responded that the government needs to devise better strategies than borrowing to ensure that commercial banks can freely lend to individuals and companies to grow the economy.
“I’m sure that is why the E-Levy issue is coming up and it’s also a very difficult issue for all of us”.
“Secondly when we look at what is happening now, if the government doesn’t go to the international markets they will borrow from local commercial banks. We’ve seen a trend in which commercial banks are now buying government’s assets. This is going to bring out a “crowding out effect” so commercial banks will not be freely lending to individuals and companies to grow the economy”, he pointed out.