Ken Ofori-Atta appeals against Moody’s downgrade of the country’s rating. The Finance Ministry has filed an appeal against Moody’s downgrading the country’s credit rating from B3 to Caa1.
The major reasons cited are the omission of key material information from the assumptions driving some of Moody’s forecasts and projections, such as the 2022 budget expenditure control measures, the 2022 upfront fiscal adjustments, and inaccurate balance of payment statistics, as well as the appointment of a new primary credit analyst only four weeks prior to such a major credit rating decision.
It also questioned the committee’s reluctance to contemplate delaying such a major rating decision until the analyst had more time to properly comprehend both the quantitative and qualitative parts of Ghana’s credit story.
The government of Ghana said in a statement that the decision to downgrade Ghana’s credit rating to Caa1 perplexes it, despite a series of progressive engagements it had with the Moody’s team, the quality of the data supplied, and the government’s medium-term economic and fiscal focus, underpinned by key fiscal consolidation reforms such as the policy decision to cut expenditure by 20%, as recently announced by the Minister for Finance.
“Perhaps, this singular action by Moody’s 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”, the statement added.
“While we understand the underlying factors that the rating agencies point out, we believe that during such a time of crisis, where the entire 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,” the South African Revenue Services Commissioner said recently. We will continue to actively support the global protest against this behemoth.”
“It is also worthy to note that, on a regional basis, there is ample evidence that, despite the fact that the impact of COVID-19 has been relatively manageable in Africa, Sovereigns on the African continent, in particular, have suffered more adverse rating actions than any other continent since the pandemic,” the statement said.
We are deeply concerned about what appears to be an institutionalized bias against African economies in this regard, as credit rating analysts adopt highly conservative postures and low-risk tolerance for African sovereign credits, with little regard for the negative impact on the cost and availability of financing for African governments.”
Continuing, the Finance Ministry expressed concern that Moody’s had rejected its appeal and had proceeded with the downgrading despite all of the issues stated, which it thinks were not taken into account in their decision.
“The administration wishes to underline that, as other credit rating agencies have affirmed, it is confident about the future and remains completely committed to restoring budgetary rectitude in the public finances.” The government’s resolve to address critical concerns about the economy, create jobs for the youth, achieve a positive primary balance, and stabilize debt is underscored by the recently announced expenditure rationalization measure to decisively strengthen fiscal consolidation of the 2022 budget,” it said.
The administration will continue to pursue continuing measures to rebuild the economy despite the COVID-19 outbreak, according to the statement.
“Senior officials from the Ministry of Finance and the Bank of Ghana will continue to engage the public and investors on the Government’s medium-term economic and fiscal policy in accordance with this.”
The government finished by declaring that it is “completely confident” in its ability to overcome present obstacles with budgetary discipline and development, in keeping with President Obama’s goal of a strong, resilient, and successful economy and a Ghana Beyond Aid.
Moody’s reduced Ghana’s long-term issuer and senior unsecured debt ratings to Caa1 from B3 on Friday, February 4, 2022, and revised the economic outlook to stable from negative.
The downgrading to Caa1 underscores the government’s increasingly onerous task of managing its interwoven liquidity and debt problems, it added.
Fitch has reduced Ghana’s credit rating to B- from B, and the country’s economic outlook to negative from stable.
“Weak income collection limits the government’s budget flexibility, and tight funding conditions on foreign markets have compelled the government to rely on expensive debt with shorter maturities,” the report noted.