Associate Professor at the Department of Finance of the University of Ghana Business School, Professor Lord Mensah has admonished President Akufo-Addo to seek clarity on how ratings by credit rating agencies are carried out.
This comes on the back of concerns raised by President Akufo-Addo who alleges international rating agencies recklessly downgraded Ghana, completely shutting the country from the international capital market, and inadvertently worsening the economy.
Speaking on the Morning Starr with Francis Abban, Prof. Lord Mensah insists the rating agencies only reflect the economic realities of a country.
“We may have to appreciate how the ratings are done across all the major rating agencies and clearly nothing has changed about these rating agencies”, he argued.
The Associate Professor further went on to explain how the ratings are done.
“The ratings are not intentions, there are models that require inputs and whatever comes out is what is used to grade you. If you look at the various models that they used, various countries have what we call relative ratios. So, if it is Ghana, they are looking at your debt to GDP and if it is the US or European Country, it is their debt to GDP. Country specific challenges are also catered for in the models. So, the model itself knows that you are an African country, and therefore if it is your budget deficit, it relates it to your GDP. So, the model is so flexible that it accepts country specific situations,” he explained.
Professor Lord Mensah also indicated that he is “surprised the president will say that the rating agencies should have considered the African situation as being vulnerable and all that. The president needs to revisit the inputs that are required for these ratings.”
Source: Ghana/Starrfm.com.gh/103.5FM/Edem Kojo
