President Nana Addo Dankwa Akufo-Addo has condemned what he describes as an attempt by rating agencies to impede the progress of African countries in accessing funds for critical national development.
Akufo-Addo’s comment comes after rating agency Moody’s downgraded Ghana’s Long-Term Issuer and Senior unsecured bond Ratings to Caa1 from B3 and changed the outlook from negative to stable.
Fitch, an international rating agency also in January downgraded Ghana’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from ‘B’ to ‘B-‘ with a negative outlook.
Statistics also reveals over 40% of Sub-Saharan African countries have suffered at least one downgrade, while 35% did same in Latin America and the Caribbean.
Addressing the 35th Africa Union summit in Addis Ababa Ethiopia Akufo-Addo said: “We need to guard against the continuing consequential stranglehold of rating agencies, which has affected the cost and access to capital markets for African countries.
“…And has during this COVID period resulted in the downgrading of many Africa countries exacerbating even more their funding challenges.”
Akufo-Addo added: “Further more it is important that G-20 leaders stick to their commitments to re-allocate to Africa SDR 100 billion agreed to at the Paris Summit in May 2020..”
President Akufo-Addo further called for a concerted effort in reforming global financial architects
“We need to work collectively as African Union to reform the global financial architect even as we build and strengthen our financial institutions.”
Government to appeal Moody’s credit rating decision
The government has served notice that it is going to appeal the recent Moody’s credit rating decision on the country because the rating firm omitted “critical data” in doing the assessment.
Moody’s has downgraded Ghana’s Long-Term Issuer and Senior unsecured bond Ratings to Caa1 from B3 and changed the outlook from negative to stable.
According to Moody’s, the downgrade is due to the “increasingly difficult task government faces in addressing the intertwined liquidity and debt challenges, pandemic induced revenue underperformance, tight funding conditions on international markets, materially decreasing governance and institutional strength and inflexibilities in the government budget”.
But a statement issued by the Finance Ministry on Sunday (6 February 2022) said, the recent fiscal consolidation measures as announced by the Finance Minister and the 2022 budget, which is anchored on debt sustainability and a positive primary balance, largely address these concerns.
“The Government of Ghana is therefore completely puzzled by the decision to downgrade Ghana’s credit rating to Caa1, despite the series of progressive engagements we had with the team from Moodys, the quality of the data supplied, as well as the medium-term economic and fiscal focus of the Government, underpinned by key fiscal consolidation reforms such as the policy decision to cut expenditure by 20%, as recently announced by the Minister for Finance.”
“Perhaps, this singular action by Moody’s confirms the notion held by many that there is an urgent need for reforms in the conduct of rating agencies given their ownership structure and the ramifications that their actions have on Sovereigns especially in Africa. The call for rating reform which was loud during the peak of the COVID-19 pandemic must be revived as a matter of urgency,” the statement said.