Former finance minister, Seth Terkper has described the recent downgrade of Ghana’s economy by Fitch Ratings as an ‘unwelcome way’ to commence bailout negotiations with the IMF.
The international ratings firm in a statement on September 23, announced a downgrade of Ghana’s Long-Term Local- and Foreign-Currency Issuer Default Ratings (IDRs) to ‘CC’, from ‘CCC’.
The latest downgrade by Fitch reflects a further junk status for the country which is now seeking an IMF bailout to sustain the economy.
Fitch explained that the downgrade also reflects the increased likelihood that Ghana will pursue a debt restructuring programme given mounting financing stress, with surging interest costs on domestic debt and a prolonged lack of access to Eurobond markets.
Seth Terkper in his reaction indicated that the latest verdict will now make it more difficult for the Government of Ghana as it begins official negotiations with the IMF on September 26.
“Fitch Ratings Ghana Downgrade. An unwelcome way to start the IMF negotiations from next week (referenced in the release),” Seth Terkper wrote.
See the tweet below
Fitch Ratings Ghana Downgrade. An unwelcome way to start the IMF negotiations from next week (referenced in the release). Recommended reading ... you can download. pic.twitter.com/yp2ntgFloz
Government has routinely explained that recent economic headwinds are attributable largely to the ravages of the COVID-19 pandemic, the ongoing Russia-Ukraine war and the banking sector clean-up.
The rippling effect has been an increase in the cost of living, record high inflation rates and downgrades of the economy by rating agencies such as S&P and Fitch – a situation which has dealt a heavy blow to government’s ability to access the international capital market.
The Cedi has also been on a free fall compelling the Bank of Ghana to resort to hiking its monetary policy rate to deal with the situation.
The worsening economic situation compelled the government in July to initiate contact with International Monetary Fund for an economic support programme.
Ghana is targeting an amount of US$3 billion over three years from the Fund once an agreement on a programme is reached.
Government hopes to complete negotiations by end of this year in order to receive the funds in the first quarter of 2023.
Seth Tekper, former finance minister