Fitch Ratings Inc. is an American financial company, one of the Big Three credit rating firms along with Moody’s and Standard & Poor’s. It is one of the three NRSROs that were named by the U.S. Securities and Exchange Commission in 1975. 551.
Another setback has befallen Ghana as a result of Fitch Ratings’ downgrading of its credit rating from B- to CCC. Due to Fitch’s policy of not providing outlooks for ratings of “CCC+” or lower, this rating did not have one.
With a poor economic outlook, Standard & Poor’s (S&P) downgraded Ghana’s foreign and local credit ratings from B-B’ to CCC+C. This update comes after Fitch assigned Ghana a B- rating in January 2022 with a negative outlook. Eight months later, the agency claims the downgrading is a result of Ghana’s governmental finances getting worse. It was stated that this contributed to a protracted absence of access to Eurobond markets, resulting in a material loss in external liquidity. Without any further external financing sources, Fitch anticipates that by the end of 2022, Ghana’s international reserves will be less than two months’ worth of current external payments.
The Akufo-Addo administration has appealed to the IMF for a support programme after a difficult 2022 that saw Ghana amid an economic crisis. The government’s fundamentally low revenue as a percentage of GDP and high-interest costs, according to Fitch, have increased the possibility that IMF help will require some sort of debt treatment. Within the next six months, it anticipates a deal with the IMF to be finalized.
The timing of such an agreement, according to Fitch, would depend on the government’s ability to produce a credible fiscal reform plan in line with increasing government revenue and improving debt affordability measures, but Fitch believes that timeframe is doubtful. According to the rating company, Ghana would have to pay $2.75 billion in interest and amortizations on its foreign debt in 2022 and $2.8 billion in 2023. Fitch anticipates that the government will be able to pay its debts to foreign creditors for the remainder of 2022 by using a combination of a $750 million term loan from the African Export-Import Bank (BBB), $250 million in syndicated loans from foreign commercial banks, and up to $200 million from the government’s sinking fund.
The economy is getting worse by the day and the government however entreats us to have confidence in them. International bodies alike including Fitch have expressed their worry over Ghana’s dying economy. Will Fitch’s predictions regarding the terms of the IMF for a debt treatment prove true? Is the government ready and capable of accepting such an agreement? With the little government resources available, I wonder if there will be anything left for us as a country.
How did we get here? The economy is so bad that we cannot seem to help ourselves. Have our leaders done us more harm than good? Where are all the loans and grants that the government received, especially during the COVID–19 period? Where are the tax monies that we pay as citizens to the government? Even the government’s sinking fund is on the verge of being depleted!