Economic analysts blamed the pressures of the government’s many political promises for the country’s economic troubles and Fitch’s recent ratings downgrade.
According to them, continuous borrowing to meet costly social and infrastructural development needs has led the country to a severe level of indebtedness that it continues to struggle to repay these debts.
Speaking on Citi TV’s Point of View, economic analyst, Toma Imihere, suggested government policy promises and pressure to deliver on them in the face of criticism from opposition parties have pushed the government to borrow at levels unsustainable.
“A government comes to power and has made so many promises on social interventions and infrastructure and because of the indebtedness a lot of its revenue is already allocated to debt service, so it goes to the market for Eurobonds to borrow money to deliver on those promises. When the government borrows that money, it knows it’s putting itself in an even more embarrassing situation, but if it doesn’t, the opposition will say that failed. This is the situation in Ghana.
He pointed out that successive governments have borrowed on terms that place the burden of repayment on their successors.
Dalex Finance chief operating officer Joe Jackson said the borrowing will cost the government dearly and the country’s economy will face a turbulent period that will require urgent action.
“We have borrowed and our debt sustainability is becoming precarious…Things are difficult. Even though the politicians won’t admit it, see it yourself and be prepared because it’s not going to be easy. The more you insist on the demands, the more difficult things become for all of us.
International ratings agency Fitch last week downgraded Ghana’s long-term foreign currency issuer (IDR) default rating from B to “B-” with a negative outlook.
The downgrade, he said, reflects the sovereign’s loss of access to international capital markets in the second half of 2021, following a pandemic-related crisis. [COVID-19] soaring public debt.
In the report, Fitch noted that “this comes against a backdrop of uncertainty about the government’s ability to stabilize debt and against a backdrop of tightening global financing conditions. In our view, Ghana’s ability to achieve planned fiscal consolidation efforts could be hampered by increased reliance on domestic debt issuance with higher interest costs, in the context of an expenditure ratio of already exceptionally high interest/revenue.
Many analysts said the recent rating was not surprising given the country’s macroeconomic situation.
Bright Simons, Honorary Vice President of IMANI Africa, suggested the B- rating was much more lenient, but puts Ghana at risk of possibly falling to a level that could seriously prolong the country’s exclusion from markets. international private capital.
The Dean of the University of Cape Coast’s Business School, Professor John Gatsi, also said the country’s rising debt profile made downgrades imminent.