Ghana's economic outlook moves from stable to positive

Ghana’s economic outlook has been scored positive by the renowned credit rating agency, Moody’s Investors Service. It pegged the country’s rating balance rating at B3, thus moving it from stable to positive. The decision to assign a positive outlook reflects Moody’s rising confidence that the Ghana’s institutions and policy settings will foster improved macroeconomic and fiscal stability over the medium term. That, it explained is partly due to the reforms implemented under the recent IMF reform programme. “Those reforms are beginning to bear fruit” it said in a statement issued Friday. Moody’s cited Ghana’s return to primary fiscal surpluses, measures to smooth the debt maturity profile and increasingly sustainable growth prospects as benefits of the programme. Despite these, it said pressures and risks remain, as evidenced by persistent revenue challenges, a potential repeat of pre-election fiscal cycles, and the emergence of significant arrears and further contingent liabilities in the energy sector, all contributing to rising public debt. “The positive outlook reflects increasing confidence that the government will manage those pressures in such a way as to sustain and enhance external and fiscal stability,” Moody’s stated. The decision to affirm the B3 rating balances, for now, those positive medium-term trends and existing challenges. A key constraint on the rating is the country’s significant exposure to international capital flow reversals, which tend to coincide with exchange rate volatility and rising external and domestic borrowing costs, putting pressure on already weak debt affordability. Measures which reduce that exposure by demonstrating reliable liquidity risk management and increasingly firm control over the debt position would support an upgrade to a B2 rating. However, Moody’s said those measures will take time to evidence impact. “As a consequence, the outlook is unlikely to be resolved quickly and may even extend beyond the usual 18 month period in order to monitor how policy unfolds following the forthcoming election, and in particular the government’s progress in implementing its energy recovery strategy. “Ghana’s foreign- and local-currency bond and deposit ceilings remain unchanged, namely the foreign-currency bond ceiling at B1, the foreign-currency deposit ceiling at Caa1, and the local-currency bond and deposit ceilings at Ba3”.

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