FORMER PRESIDENT John Dramani Mahama has derided the recent downgrade of Ghana’s foreign and local currency sovereign ratings from B-/B to CCC+/C, describing it as a “junk status”.
According to him, this is evidence of economic incompetence, adding, “The steep depreciation of the Ghana Cedi in recent days, clearly shows that the mid-year review of the 2022 budget failed to win back the confidence of the investor community and the Ghanaian public.”
In a post on his Facebook wall yesterday, Mr. Mahama, who is the prospective leader of the opposition National Democratic Congress (NDC), said, “Unfortunately, no credible remedial plans have been put forward by the government to salvage the economy.”
He remains stoic about the government claims that it has implemented “bold policies” this year to address macro fiscal challenges and debt sustainability, clinging to his demand for a national dialogue on the economy.
“A national dialogue on the economy, bringing some of our best brains together will serve us well, even as we prepare for debt restructuring and negotiation of an IMF programme,” ex-President Mahama reiterated.
In February this year, the former President in a write-up titled: “Time is ticking for the crisis-ridden Ghanaian economy,” called for a public forum on the Ghanaian economy, recalling that the NDC government, which he was leading, in 2015 faced challenges, convened the Senchi Economic Forum to tap the brains and expertise of a wide variety of knowledgeable people and stakeholders.
“We must as a matter of urgency, borrow a leaf from our [NDC] sound approach toward the challenges we faced in 2015,” he stated.
To him, such a forum will help provide for “urgent and constructive dialogue among stakeholders with the view to fashioning out a robust set of policy responses to the economic challenges before we get to the point of no return.”
Last Friday, the American credit rating agency, S&P Global Ratings, downgraded Ghana’s foreign and local currency sovereign ratings from B-/B to CCC+/C.
According to a report by MarketWatch, S&P recorded a negative outlook for the country and argued that the new position is “reflecting Ghana’s limited commercial financing options, and constrained external and fiscal buffers.”
S&P reportedly claimed that the COVID-19 pandemic as well as the Ukraine-Russia conflict have magnified Ghana’s fiscal and external imbalances.
The credit rating agency said there had been a high demand for foreign currency, which is driven by factors including non-resident outflows from domestic government bond markets, dividend payments to foreign investors, and higher costs for refined petroleum products.
The report indicated that Ghana had also been affected by a lack of access to Eurobond markets.
The agency said the government had passed a levy on electronic transactions and a legislation to tighten exemptions on tax payments, including for VAT, among other moves to raise local revenue mobilisation.
“While these changes could improve the tax intake going forward, the situation remains challenging, and over the first half of 2022, the fiscal deficit has exceeded the government’s ambitious target,” S&P reportedly stated.
S&P had affirmed Ghana’s ratings in February, as Moody’s downgraded the African nation to Caa1 with a stable outlook.
In a response, the government expressed disappointment over the S&P’s decision to downgrade the country, despite the bold policies implemented this year to address macro fiscal challenges and debt sustainability.
The Finance Ministry asserted in a statement issued Monday the macro fiscal challenges and debt sustainability have been significantly exacerbated by the impact of these global external shocks on the economy.
The statement intimated that the government would continue to be proactive in addressing the impact of “these external and domestic headwinds on the economy and on the lives and livelihoods of Ghanaians.”
“Government has implemented key revenue and expenditure measures, including the 30% cut in discretionary expenditures,” the statement noted.
It added that the delays in the passage of key revenue measures introduced in the 2022 budget affected revenues performance in the first half of the year.
However, the statement said all the revenue measures introduced in the 2022 budget, including the review of the MDA Fees and Charges Bill, the Tax Exemption Bill, the E-Levy Bill, have all now been promulgated by Parliament.
“These fiscal measures are now in full implementation mode to support our fiscal and debt sustainability policies,” it asserted.
According to the statement, the government is committed and confident that it will successfully emerge from these challenges in the shortest possible time “as we have demonstrated the track record to do so in the Akufo-Addo-led Government.”
“Our current engagement with the International Monetary Fund for a Programme, incorporating our Enhanced Domestic Programme (EDP), is expected to support our drive to restore and sustain macroeconomic stability; debt sustainability and promote growth and job creation whilst ensuring social protection to achieve our vision of a Ghana Beyond Aid,” it posited.
BY Ernest Kofi Adu