Vice President, Dr Mahamudu Bawumia has blamed the cedi's struggles against major trading currencies as the reason for negative credit ratings on the economy.
The Ghana cedi has in the first quarter of this year weakened by about 14.6% to the US dollar, making it the second-weakest currency after the Russian rouble in a list of some 20 emerging market units tracked by Reuters.
Speaking at the TESCON event at Kasoa in the central region, Dr Bawumia said challenges in getting the 2022 budget passed, impasse over key legislation in Parliament also signalled to investors to roll over their investment in Ghana’s economy and among others.
“The financial markets’ assessments of the 2022 budget, unfortunately, concluded that our projected 40% increase in revenue which underpinned the 2022 budget was not likely to materialize and therefore, our deficit will increase. The chaotic battle in Parliament over the budget and the passage of the budget did not also help matters. This created uncertainty and signal to the market that government may not be able to get most of its programmes passed in a tightly balanced Parliament. This further reinforced the lack of confidence by investors in the budget.”
“Furthermore, delays in implementing major tax reforms…appeared to support the assessment that the market will have difficulties in passing its programmes. To add to these negative market sentiments, there was a sovereign credit rating downgrade by Fitch and Moody’s as a result of concerns about fiscal and debt sustainability,” Dr Bawumia said.
He further added that Ghana's decision to not issue a sovereign bond on the international capital for this year also signalled a negative economic outlook to investors over the adequacy of Ghana's foreign exchange.
“So, they [investors] wanted to get a hold of the foreign exchange now, and this led to the demand for the US dollar on the market. The increases in interest rates in the US and other economies also made the cedi unattractive. And in February we had the conflict between Russia and Ukraine. Associated fuel price increases also put pressure on the local foreign exchange market,” the vice president added.
