Government should take Ghana’s downgraded credit rating seriously – Prof. Mensah

Fitch downgrade Ghana’s credit ratings to B-

Govt now has to borrow at a higher cost, Prof Mensah

Downgrade would have serious consequence on Ghana’s economy, UG lecturer

A senior lecturer at the University of Ghana Business School (UGBS), Prof. Lord Mensah, has urged government not to take the downgrading of Ghana’s Long-term Foreign-Currency Issuer Default Rating (IDR) by Fitch Ranking for granted.

He said because of the downgrading of Ghana’s credit ratings to a B-, the country would have difficulties issuing bonds at the international market adding if the government fails to handle the situation properly the economy would suffer.

The senior lecturer who was speaking in an interview on JoyNews’ PM Express on January 17, 2022, said the downward grading would make investors reluctant to invest in government bonds.

“If Ghana has been downgraded by a margin, which is a B and it has a negative outlook, it tells you that yes indeed the investor needs to be careful and, in the end, if you’re bringing your money to the Ghanaian environment you have to be careful because the ability to pay keeps on degenerating over the years and this is what the outlook looks like,” Prof Mensah was quoted by myjoyonline.com.

He further stated that because foreign investors would be reluctant to buy bonds from government, it would be forced to issue the bonds at a higher interest rate which would worsen the country's indebtedness.

“When it happens like that, Ghana going to the market to raise money, we’re either going to raise money at a higher cost or we may not get the money at all. But then of course we may have to ask, what is the quantum of the investor’s funds globally that are moving Ghanaians or the Ghana government to be able to attract when we go onto the Eurobond market?"

“Now we’re not attracting much so effectively, if we take a global investor who wants to diversify, obviously he would want to pump some money into our environment, but that is going to be at a higher cost," he said.

“And in the end, it also depends on the government signals on the ground as to how urgent we need money. If the government is desperate for money, then by hook or crook we may borrow at a higher cost and in the end, the consequence will be that our debt will keep on growing,” he added. Read Full Story