The Ministry of Finance says the implementation of a medium-term recovery and revitalisation programme will put the economy on a sound footing and return it to pre-COVID-19 levels.

Consequently, it has assured the public that efforts are already underway to address the concerns raised by the international rating agency, Fitch, in a recent position it expressed on the economy.

A highly placed source at the ministry told the Daily Graphic that the variation of Ghana’s economic outlook from stable to negative did not take into account the long-term prospects of the economy but focused only on short-term concerns.

It said the downgrade of Ghana’s long-term foreign currency issuer default rating (IDR) was due to the fact that the rating agency used a model that looked at the immediate term.

Fitch position

The rating firm last Tuesday varied Ghana’s IDR from stable to negative, citing the significant deterioration in public finances as a result of the COVID-19 pandemic and the delay in the government's fiscal consolidation efforts.

It said the delay had reduced the country’s ability to absorb further shocks for an extended period.

“Moreover, in our view, the lack of a clear majority in Parliament following the December 2020 elections increases the risk of fiscal slippages,” the international firm said in the release that announced its decision.

It explained that Ghana’s high public debt level and low revenue base meant that the economy’s debt affordability metrics remained markedly weaker than rating peers over the rating horizon.

COVID-19

In response, the source at the Ministry of Finance, who was not authorised to comment on the matter, said the reasons adduced by the rating agency were due to the COVID-19 pandemic, which the government had effectively managed.

It said the government had also found an effective antidote to the fallouts from the pandemic in the form of the Ghana CARES Obaatanpa programme.
It added that the rollout of the vaccination programme also meant that things could revert to normal in a very short time.

“As you know, Ghana was one of the first countries in Africa to take delivery of vaccines and start vaccinating its people,” it explained.

Ghana started a vaccination programme on March 2 and continued to May this year. So far, 376,169 people have received the full dose of the COVID-19 vaccine, according to the Ghana Health Service (GHS).

The GHS has administered 1,228,216 doses in the first and the second rounds of the exercise, including those who have taken only one round of the dose.

Expert position

Meanwhile, an economist, Dr Said Boakye, has advised the government to take Fitch’s position on Ghana's creditworthiness as a warning to fast-track fiscal consolidation for public finances to improve.

He said the revised outlook position was an indication that the country was more likely to default in the servicing of its foreign currency-denominated debts, for which reason measures needed to be taken to ease the burden and prevent the risk from materialising.

“It is not so drastic but a warning sign that if things do not get better, a real downgrade is imminent, and when that happens, our cost of borrowing will go up and the economy will suffer,” Dr Boakye, who is the Head of Research at fiscal policy think tank, the Institute for Fiscal Studies (IFS), said.

He said the government needed to arrest the growth of the public sector wage bill, rein in borrowing and boost revenue to help improve the fiscal situation.