Rating Agency, Moody’s is predicting that Ghana’s debt to GDP ratio will hit 70 percent by the end of 2020, up from the 63.76 percent recorded in 2019.
This is due to the anticipated widening of current account deficit, huge capital outflows from non-resident investors in the local currency market as well as outstanding energy sector arrears of US$2.7 billion at the end of 2018.
In spite of this, the agency affirmed a B3 rating for Ghana's long-term senior unsecured bonds, signifying emerging strength following the recently fiscal reforms implemented under the IMF program and Public Financial Management Act (2016).
Moody’s, however, downgraded the country’s economic outlook from positive to negative, following the tightening of domestic (tax) revenue and external funding conditions associated with the devastating impacts of the covid-19 pandemic on global economic activities.
This is projected to adversely affect the country’s debt affordability i.e. (annual interest payments/revenue) as it is expected to surpass 40% in 2020.
Concerns by Finance Minister
This comes after the Minister of Finance, Mr. Ken Ofori-Atta, had earlier expressed his concerns in Parliament that, current developments begin to downgrade the economic outlook of Ghana and other African countries.
He said African Finance Ministers have been working together with the International Monetary Fund (IMF) and banks to look at ways in which they could get a suspension of interest payments and principal payments for this year.
“We have about US$44 billion that Africa has to pay as interest this year and we have made some progress today where interest payments will be deferred for at least nine months and we are going to push for two years.”
He said this would, however, come at a cost to African countries, as the rating agencies would get nervous about the potential for commercial credit to be included in this facility which would cause them to downgrade African countries.
“We expect in the coming days, weeks, months, for a certain degree of downgrading in outlook for the continent; already South Africa has been downgraded,” he noted.