The Ghanaian government has challenged Moody’s decision to reduce the country’s credit rating.
Ghana’s long-term issuer and senior unsecured debt ratings were lowered to Caa1 from B3 by Moody’s, with the outlook revised to stable from negative.
The new grade, it added, underscores Ghana’s difficulties in resolving its liquidity and debt problems.
The country’s inefficient revenue production was also cited as a factor in the grade.
“The reduction to Caa1 shows the government’s increasingly onerous task of dealing with its interwoven liquidity and debt problems. The government’s budget flexibility is limited by low revenue generation, and tight funding conditions on international markets have compelled the government to rely on pricey debt with shorter maturities.”
However, despite the government’s recent budget restructuring initiatives, the Finance Ministry said it is perplexed by Moody’s rating of the country.
“Given Ghana’s status as a model of democracy in Africa, we find it difficult to understand Moody’s assessment of the deterioration of Ghana’s institutional strength.”
“The government of Ghana is therefore completely perplexed by the decision to downgrade Ghana’s credit rating to Caa1 despite a series of progressive engagements we had with the Moody’s team, the quality of data supplied, and the government’s medium-term economic and fiscal focus, underpinned by key fiscal consolidation reforms such as the policy decision to cut expenditure by 20%, as recently announced by the Minister of Finance,” the government said.
The government is appealing the rating.
The Finance Ministry also revealed in the announcement that it had unsuccessfully appealed Moody’s rating.
“Unfortunately, Moody’s turned down our appeal and proceeded with the downgrading despite all of our concerns, which we believe were not taken into account in their conclusion.”
Lucie Vila, the leader of the Moody’s team that cut the country’s credit rating, was also approached by the Finance Ministry with concerns.
Lucie Villa’s influence
Lucie Villa, according to the Ministry, did not fully comprehend Ghana’s credit story.
“Prior to the announcement, Moody’s virtually engaged senior government officials from the Ministry of Finance and the Bank of Ghana on numerous problems between the 28th of January and the 3rd of February 2022.” Lucie Villa (Moody’s Lead Analyst on Ghana) led the Moody’s team, which was supervised by Matt Robinson. It’s worth noting that Lucie Villa only recently took over as Moody’s lead analyst for Ghana (beginning of January 2022). We are worried that Ms. Villa may not fully comprehend and analyze Ghana’s deteriorating credit situation since we initially assigned a credit grade to the country in 2003. She has also not visited the nation since taking the job, thus this downgrade at such a crucial time was based solely on a desk exercise, virtual discussions, and what we perceive to be the suppression of key evidence.”
Regardless of the government’s difficulties in overturning Moody’s rating, the Finance Ministry has stated that the government will continue to undertake ongoing attempts to revive the economy in the face of the COVID-19 pandemic.
Government remains “completely confident in our will to overcome the current challenges with budgetary discipline and growth, in line with the president’s ambition to build a strong, resilient, and prosperous economy and a Ghana Beyond Aid,” according to the statement.
Ghana was also downgraded by Fitch.
Ghana’s Long-Term Foreign-Currency Issuer Default Rating (IDR) was reduced to ‘B-‘ from ‘B’ with a negative outlook by Fitch just a month ago.
The country’s Fitch rating is the lowest in 22 years.