Databank economist advises government on how to get the economy back on its feet
An economist with Databank, Courage Martey has advised the government to quicken the pace of fiscal consolidation following another downgrade of the economy by rating firm, S&P Global Ratings from B- to CCC+, months after Moody’s downgrade.
According to the economist, this will serve as an antidote to lift the country’s economy above its woeful performance which led to its downgrade.
The downgrade of Ghana’s economy from B-/B to CCC +/C impact negatively on Ghana’s debt sustainability efforts and will lead to investors requesting a higher credit risk premium.
“There are several things that need to be done for us to get an upgrade. It significantly hinges on rebuilding fiscal and external buffers because that has been the main point of concern for investors. There must be an improvement in our fiscal deficit position. Now, if you look at the S&P statement, for instance, they essentially considered the need to record a primary surplus equivalent to 2% of GDP.”
“That is a tall order though the government has already signalled that it is working to record a primary surplus equivalent to 0.4 worth of GDP. We are not far from the direction that the fiscal situation should be heading, except that it is moving slower than the rating agencies would anticipate. Thus, the government should be able to quicken the pace of fiscal consolidation. That would be good news towards, reinstating us back above the current downgraded levels we have found ourselves in,” he said.
Though S&P commended the government for some of the measures it has adopted to consolidate the fiscal deficit which includes the passage of the exemptions bill, the high cost of borrowing and softening growth is becoming an albatross to putting debt to GDP on a downward path.
