Nana Akufo-Addo- President of Ghana
By: Emelia Essumanba- Josiah- Daily Express
Groupe Nduom (GN) Research has urged government to instantly carry out policies to restructure the economic system following the country’s possible downgrade by credit rating agencies during their periodic assessment of economies in Africa.
According to recent publications by Standard & Poor, Ghana was rated B- with a stable outlook, Moody's rated Ghana B3 with a stable outlook and Fitch's credit rating for Ghana was a B with negative outlook.
This, GN Research believes is as a result of the country’s poor economic performance in managing its debt stock, currency, and high budget deficit as well as falling foreign direct investment coupled with low commodity prices could be the debilitating factors.
The report signed by Samuel Kofi Ampah of GN Research revealed that implications of such actions can affect the country’s ability to attract foreign direct investment as it gives investors signals of macroeconomic challenges. He added that it also defeats policy credibility, especially when credibility tags are against the previous administration's failure to achieve economic and political leadership. Arguably, the most challenging stress about Ghana could be the morality to increase the debt stock levels above the 71% of GDP at a high price.
Recent statistics from the Bank of Ghana showed that Ghana’s total debt increased from GHc109.4 billion in August 2016 to GHc119.9 as at November 2016, representing 71.9% of GDP. This showed that between August 2016 and November 2016, Ghana’s debt stock had increased by GHc10.5 billion. In addition to the debt issues, the budget deficit for the fiscal year of 2016 is estimated to be about 7%, higher than the targeted 5% and the 6.3% recorded in 2015.
Other reasons given by the report for Ghana’s possible downgrade are the fall in foreign direct investments (FDI), depreciation of the Ghana Cedi and high currency risk.
GN Research suggested that much attention must be paid to the fiscal deficit and the rate at which the country borrows.
“Steps must be taken now to restructure the country’s debts and renegotiate interest payments if possible. Also, the situation where state corporations borrow on central government’s budget must be reviewed. These corporations must be managed efficiently and be made to borrow on their own accounts to reduce the country’s obligation to creditors”, the report stated.
Concluding, the report said Government must also control its expenditure and find sustainable ways of increasing revenue other than borrowing adding that the central bank must play its role effectively to reduce inflation, interest rates and stabilize the currency to improve the outlook for the economy.