Positive Outlook for improved Credit Rating

Finance Minister Ken Ofori-Atta says he expects Ghana’s credit rating to improve in the next few months. His optimism is based on assurances given to the credit rating agencies that government will be prudent with its expenditure this year, boost revenue and meet most of the macroeconomic targets set out the 2017 budget.

This was after the minister met the rating agencies in Washington DC and New York in the U.S. as part of the Non-deal road show which ended in New York on Wednesday. According to the Finance Minister, the rating agencies have shown signs that are encouraging. “I think that they are seeing an economic team that is capable, that has energy, there is some excitement around it and a commitment that they have not seen before, so I think, in forward looking they all are going to be more positive, than prior times”. In a response to timeliness of this action by the rating agencies, Mr. Ofori-Atta said engaging these institutions is all about trust; “the thing about rating agencies is one of relationship, and a sense of transparency and credibility and I think that we are getting that through”.

h3. Ghana’s Troubles with Rating Agencies

The country over the years has struggled in securing a favourable credit rating from these agencies; Moody’s, Fitch and Standard and Poor’s. Moody’s for instance in September 2016 gave Ghana B3 rating but Changed Ghana’s outlook to stable from negative. Fitch, on the other hand, affirmed the country’s ratings at B but with a negative outlook. Standard and Poor’s in April last year gave Ghana B- ratings but with a stable outlook. All these verdicts, analysts say were influenced by the country’s rising public debt which hit GH122 billion as at December last year according to the Bank of Ghana. This put the country’s debt to GDP ratio above 70 percent. Most of these institutions have ranked Ghana just one level above junk status.

Analysts say this means that, if measures are not implemented quickly, to move Ghana from the B2 and B3 categories, the cost of credit to the country could hit the roof. For some, it is good news that Moody’s gave Ghana a stable outlook, which is optimistic. Others say depending on how the new administration implements that IMF extended credit programme, that could also influence Ghana’s credit rating going forward.

Poor rating means that Ghana will be paying more interest when it borrows from the international market, especially when it comes to the issuance of local bonds and possibly a Eurobond. According to the 2017 Budget government, government has set aside a little over 10 billion cedis as interest payments.

h3. Finalising Eurobond Deal

According to Government, the non-deal road show was successful because officials were able to convince donors, international institutional investors in US and London about government’s commitment to stabilise the economy. The team also used the opportunity to engage other international institutions like Millennium Challenge Corporation and other development partners. The non-deal road show was jointly led by Vice President Dr. Mahamadu Bawuamia and Finance Minister Ken Ofori-Atta and Governor of Bank of Ghana, Dr. Enerst Addison. The None-deal roadshow took the team to London, Washington DC, New York and Boston. The Vice President has maintained that government has no immediate plans of issuing a Eurobond despite this exercise.

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