The African Union’s (AU) specialised governance and socio-economic development Agency said that such ratings, together with “speculative comments” by the rating firms had contributed the country’s inability to borrow from the capital market.
APRM raised the concern in a statement issued on Friday following the recent downgrade of Ghana by Standard and Poor (S&P) and Fitch Ratings on the country’s ability to pay back its debt.
The capital market promotes economic efficiency by transferring money from those who do not have an immediate productive use for it to those who do, particularly for Governments of developing countries including Ghana.
This year alone, S&P have reduced Ghana’s ability to pay back its debt on three consecutive times, while Fitch have done so on four occasions.
In its latest ratings, Ghana’s long-term foreign currency sovereign rating was lowered further into junk grade, from B- to CCC+ with negative outlook and B- to CCC by S&P and Fitch on August 5 and August 10, 2022, respectively.
According to APRM the ratings did not reflect the credit-positive policies being implemented to address various macro-fiscal challenges that the country was facing, though they acknowledged the effects of the COVID-19 pandemic and the global shock of the crisis in Ukraine on Ghana.
“The speculative comments and ratings actions by the international rating agencies in the first half of 2022 materially contributed to the country’s losing access to international financial markets,” the statement noted.
“The APRM views the unjustified negative rating actions in Africa since the beginning of 2022 as unwarranted and contrasting the continent’s economic recovery efforts from the devastating impact of the Covid-19 pandemic. This is compounding the complexity of driving the economic recovery process and making current fiscal measures ineffective,” it added.
Similarly, the Agency said that it was also concerned about the increase in the number of negative rating actions against African countries by the international rating agencies.
It, therefore, called for coordinated response to address the ongoing speculative pessimism by analysts and for ratings to be enablers rather than impediments of economic recovery.
Specifically, APRM called for regulatory measures, as well as the development of alternative ratings and alternative funding sources for African countries.