Director of the Institute for Statistical, Social and Economic Research (ISSER), Professor Peter Quartey, has downplayed Fitch Ratings negative rating action of Ghana’s Long-Term Foreign-Currency Issuer Default Rating (IDR).
According to the seasoned economist, Fitch Ratings revision of Ghana’s IDR from ‘B’ with a positive outlook to ‘B’ with a negative outlook, will not have any significant impact on the country’s upcoming borrowings on the capital market (bonds).
“Fitch’s rating will not significantly impact the country’s cost of borrowing, there will be a marginal impact but not that significant. Because the numbers are not new and we know where we are in terms of our borrowing and fiscals and also know how covid has affected government’s revenue sources. And so this will not have any major impact on our bonds or rate of interest paid on them,” he asserted.
Prof Quartey made the assertion in view of the upcoming $2 billion Sustainable Social Bond.
Proceeds from the sustainable bonds will be used to refinance debt used for social and environmental projects and pay for educational and health programmes.
Revision of Ghana’s IDR to ‘B’ with a negative outlook means that bonds issued by the country are of a non-investment grade and that there is the likelihood of the country defaulting on its debt obligations.
According to Fitch, the revision of the outlook to negative reflects the significant deterioration in the country’s public finances stemming from the Covid-19 pandemic and the delays to the government’s fiscal consolidation efforts, which reduce Ghana’s ability to absorb further shocks for an extended period.
“The ‘B’ rating reflects the high public debt level and low revenue base, which mean that Ghana’s debt affordability metrics will remain markedly weaker than rating peers over the rating horizon. This is balanced against Fitch’s expectation of a recovery in economic performance and a stabilisation of debt/GDP and the ready availability of external and domestic financing,” stated Fitch in its rating action of the country on Tuesday, June 22, 2021.
