Dr Williams Peprah
Financial expert Dr Williams Peprah has said the government will not default on its loan repayments despite the country’s credit rating being downgraded to deeper junk status by ratings agency Fitch.
Fitch’s said its decision on Ghana reflects soaring interest costs on domestic debt, a prolonged lack of access to Eurobond markets and the increased likelihood that Ghana will pursue debt restructuring given the growing financial stress.
Speaking to Joy Business, Dr Peprah, an associate professor at Andrews University in Michigan, US, said the government needed to act decisively, however, to reduce additional pressures on the economy.
He therefore wants the government to drastically reduce its expenditure, both current and capital, in order to settle its interest payments quickly.
“We can mention that, in terms of ability to pay, Ghana is in a position [to repay]. Regarding the character of Ghana, when we do the credit analysis, we have not defaulted on any of our loans. This therefore gives a signal that the likelihood of Ghana being in default character is not very imminent”.
“Regarding the conditions, we know that Ghana hopes to meet all the conditions. Indeed, this is why Ghana is pursuing an International Monetary Fund (IMF) program to be able to give a bailout in terms of liquidity support so that Ghana can find its feet”.
IMF program to calm financial markets
Dr Peprah hopes that an IMF program will be launched by the first quarter of 2023 to calm financial markets and restore the economy.
“We hope this [IMF programme] should be detached in the first quarter of 2023; some funds will come from the IMF to help the economy recover. But more importantly, if this rating is alarming and worrisome, we may have to hope that we can turn the tide by being disciplined with our spending in the country.”
He, however, stressed that the upgrade of Ghana’s credit rating from ‘CCC’ to ‘CC’ was expected, although all is not lost.
“The ratings given by Fitch that place Ghana’s long-term monetary debt at junk status are very alarming, but they were anticipated. However, if you look at the analysis of how to determine Ghana’s creditworthiness, all is not lost.
“We admit that the ability to pay with regard to our debt ratio has increased but it is not too alarming,” he added.
He alluded to the fact that there is a high likelihood that the government intends to come up with strategies that would increase revenue collection, “but what we really expect from the government right now is to reduce its expenditure both in capital and in current expenditure considerably to make room for certain funds to be able to settle the loans that the government has contracted”.
Fitch downgrades Ghana to ‘trash’ status
Rating agency Fitch on Friday, September 23, 2022, downgraded Ghana’s default local and foreign long-term (IDR) issuer ratings to “CC” or undesirable status.
This is the second time in 2022 that it downgrades Ghana’s creditworthiness.
It also comes two days after President Akufo-Addo slammed rating agencies at a United Nations conference for unfairly rating and rating African countries at a time when the global economy was going through tough times.