(Ecofin Agency) – The S&P agency is the third to estimate that the evolution of Ghana’s economic parameters makes its ability to repay its debt, owed to both its local and international creditors, uncertain. A decision that may cause a new controversy.
S&P Global Ratings has, in a note issued on August 5, 2022, downgraded Ghana’s ratings as an issuer of international and local debt to CCC+ and C, meaning the risk of one or more loan defaults is now ” very high “. The US rating agency also considers the outlook for this situation to be negative.
She considered that the efforts undertaken by the government of the second economy of ECOWAS to reduce the deficit position of its budget are insufficient to restore balance on its debt, because its borrowing costs are increasing rapidly, while growth economy evolves at a slower pace, which contributes to a further deterioration of the debt-to-gross domestic product ratio.
But internationally, it is the country’s ability to repay its foreign debt that is the subject of most concern among S&P experts. ” The pandemic and the Russia-Ukraine war have amplified Ghana’s fiscal and external imbalances. Capital outflows by non-residents in the local government bond market, lack of access to Eurobond markets, purchases of dollars by individuals, dividend payments to foreign investors, and more expensive imports of commodities oil refineries, pushed up demand for foreign currency, leading to one of the lowest levels of foreign exchange reserves since the fourth quarter of last year “, they said according to the document consulted by the Ecofin Agency.
S&P also believes that the Ghanaian authorities now have few options to refinance their public debt, as access to the international capital market has become more difficult for them, while internal commercial banks cannot support the needs of the government.
Ghana is however credited with good points in terms of economic governance. Above all, he is paying the price for an international situation that is negatively impacted by the Russian-Ukrainian crisis, and by the inability of the American authorities to find a coherent solution to the soaring dollar, the currency used in 60% of international economic transactions. .
These global factors have resulted in a hardening of the cost of living in the country and have pushed many households to resort to alternatives to consume less expensively, which has the effect of diluting the efforts that have been made to reduce the informal sector. and increase the mobilization of fiscal resources.
This new rating from S&P Global Ratings is likely to swell the controversy over the relevance of the opinions issued by rating agencies on African economies. Until then only Moody’s and Fitch Ratings had lowered Ghana’s sovereign rating and the government had particularly criticized the decision of the first institution.
The Ghanaian authorities are not the only ones to be critical of the conclusions of the rating agencies. According to a study published by the United Nations on December 31, 2021, 41% of rated countries in sub-Saharan Africa were downgraded at least once between February 2020 and March 2021, the highest regional average, compared to only 6% for advanced economies. The consequence was that no country in sub-Saharan Africa was able to issue eurobonds for a good part of 2020, when they too had to face confinements imposed by Covid-19.
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