The National Communications Officer of the opposition National Democratic Congress (NDC), Sammy Gyamfi has said Ghana’s poor rating by rating international agencies is as a result of reckless spending and borrowing spree by the Akufo-Addo-led administration.
Rating firm Fitch has corrected what it says was an error in its initial rating of Ghana’s economic outlook.
In a statement on its website friday, the firm said: “This is a correction of the rating action commentary published on 14 January 2022. It corrects the rating action on Ghana’s senior unsecured debt, which Fitch has downgraded, not affirmed.
“Fitch Ratings has downgraded Ghana’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘B-‘ from ‘B’. The Outlook is Negative”.
Moody on the other hand has projected that Ghana’s government debt ratios will continue to deteriorate in the next few years with extremely weak debt affordability significantly constraining policymaking.
Moody’s estimates that government debt ended 2021 at 80% of GDP while interest payments alone consumed half of government revenue that year (positioning Ghana with the second largest ratio among Moody’s rated sovereigns).
In reacting to the ratings in a Facebook post the National Communication Officer for the NDC catalogued a number of reasons that has contributed to the abysmal performance by President Akufo-Addo’s government.
“This situation has been largely occasioned by the reckless spending of the Akufo-Addo/Bawumia government, which reckless spending reached its climax in 2020 and has now inescapably plunged the country into an unprecedented budget deficit,” the NDC National Communication Officer disclosed.
He continued “This coupled with the government’s penchant for reckless and unprecedented borrowings which have been largely wasted on consumption-driven activities of this government have plunged the nation into an unsustainable debt hole.”
Below is the full statement
ON THE MATTER OF GHANA’S DOWNGRADE BY FITCH AND MOODY’S
The B- and Caa1 rating of Ghana’s economy by Fitch and Moody’s respectively is our worst-ever rating by these internationally reputable agencies. What these downgrades simply mean is that:
- Ghana’s economy has virtually collapsed. Investor confidence in Ghana’s ability to meet its debt obligations is at an all-time low. What this effectively means is that the country’s credit rating is very poor and highly risky. In other words, the investor community believes that our ability as a country to stabilize and service our debt is very very weak.
- So bad and precarious is our economic situation that Ghana has lost access to the international capital (eurobond) markets. Hence, the country’s significant reliance on very costly short-term domestic borrowing, which is increasingly leading to the crowding out of the private sector. Even worse is the fact that Ghana defaulted on its loan repayments in 2020 and 2021 ($1,035,867 and $744,048 respectively).
- This situation has been largely occasioned by the reckless spending of the Akufo-Addo/Bawumia government, which reckless spending reached its climax in 2020 and has now inescapably plunged the country into an unprecedented budget deficit. This coupled with the government’s penchant for reckless and unprecedented borrowings which have been largely wasted on consumption-driven activities of this government have plunged the nation into an unsustainable debt hole. Currently, Ghana’s debt to GDP ratio is at an all-time high of 83% according to Fitch (i.e including energy sector debt), with interest payments of about 50% of total revenue. This current situation is worse than the country’s economic position when we joined the HIPC program sometime in the year 2001.
- In short, Ghana’s economy has been collapsed by Alhaji Bawumia and President Akufo-Addo. We are now in the junk category of nations. We no longer have money for developmental projects. Moody’s projects that Ghana’s government debt ratios will continue to deteriorate in the next few years with extremely weak debt affordability significantly constraining policymaking. We are in a situation where we must continue to borrow at very high interest rates to meet our basic needs. This is going to escalate the level of hardships and suffering in the country for all Ghanaians.
- The solution to the economic crises on our hands doesn’t lie in the E-levy but rather:
* Cutting down on government’s expenditure which has been mainly consumption-related. For example, the rental of hyper-expensive luxurious jets by President Akufo-Addo must cease forthwith.
* Plugging the holes in the public sector and significantly reducing financial irregularities, leakages, waste and corruption.
* Reviewing and significantly reducing tax exemptions, among others.
In all this, the head of the economic management team, Alhaji Bawumia has gone mute and is nowhere to be found. The chickens have come home to roost. It is time for reality check.
Sammy Gyamfi
NCB-HQ
Source: Ghana/Starrfm.com.gh/103.5FM/Isaac Dzidzoamenu
