Negative credit ratings on Ghana, other African countries contrasts economic recovery – APRM says
The African Peer Review Mechanism (APRM) of the African Union [AU], has said negative credit rating actions of African countries since the beginning of this year, contrasts with the continent’s economic recovery efforts from the devastating impact of the Covid-19 pandemic.
According to the APRM, the rating agencies actions is compounding the complexity of driving the economic recovery process and making current fiscal measures ineffective.
The APRM made the assertion on the back of the recent downgrade of Ghana’s creditworthiness by Fitch Ratings.
“We have noted with concern the increase in the number of negative rating actions against African countries by the three international rating agencies. The downgrade of Ghana is the latest such rating actions in which the country’s long-term foreign currency sovereign rating was lowered further into junk grade, from B- to CCC+ with negative outlook and B- to CCC by S&P and Fitch on 5th and 10th August 2022, respectively.
“This is the third and fourth consecutive rating downgrades on Ghana by the three major international rating agencies since the beginning of 2022.
“The APRM corroborates with the Government of Ghana in expressing its reservations on the decisions by the international rating agencies to downgrade Ghana despite the credit-positive policies being implemented to address various macro-fiscal challenges that the country is facing”, it explained.
Furthermore, it pointed out that whilst the effects of the COVID-19 pandemic and the severe global shock of the crisis in Ukraine on Ghana, highlighted by S&P and Fitch can be acknowledged, the speculative comments and rating actions by the international rating agencies in the first half of 2022 materially contributed to the country’s losing access to international financial markets.
In view of the continuing trend of negative credit rating actions on the continent, the APRM called for coordinated response to address the ongoing speculative pessimism by analysts and for ratings to be enablers rather than impediments of economic recovery, adding, “The response mechanisms include regulatory measures, developing alternative ratings and alternative funding sources”.
Both S&P and Fitch few weeks ago downgraded Ghana’s credit ratings to junk status.
Ghana’s Long-Term Foreign Currency Issuer Default Rating was downgraded to ‘CCC’ from ‘B-‘ by Fitch Ratings.
This was the second CCC credit rating downgrading received by the country in a little over a week with the first CCC downgrade coming from Standard and Poor’s Global Ratings.
The downgrade, Fitch Ratings noted, reflected the deterioration of Ghana’s public finances, which has contributed to a prolonged lack of access to Eurobond markets, in turn leading to a significant decline in external liquidity.
“In the absence of new external financing sources, international reserves will fall close to two months of current external payments (debits in the current account) by end-2022”, it explained.
