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Reactions continue to pour in from experts in academia and civil society organizations about recent description by President Nana Akufo-Addo of credit ratings of developing economies including Ghana by renowned rating agencies as “reckless” and reason Ghana had to seek her 17th IMF bailout.
Speaking at the 30th anniversary of the African Export-Import Bank in Accra on June 20, 2023, Mr. Akuffo Addo said, “ I can comfortably and convincingly say this as the AU Champion for African Financial Institutions and leader of a country which recently had to deal with one of the most difficult periods in its post-independence history, difficulties which were exacerbated by the reckless behavior of rating agencies that engaged in pro cyclical downgrades shutting Ghana out of capital markets and turning its liquidity crisis into a solvency crisis”.
Speaking on the Super Morning Show on Joy FM on Wednesday, July 5, former Finance Minister in John Mahama’s Government, Mr. Seth Terkper agreed that rating agencies could be bias in their ratings but cautioned African governments to be prudent in their fiscal policies so as to avoid subjecting their economies to biases during credit ratings by rating agencies.
Commenting on the matter, Professor of Economics and Finance at the University of Ghana Business School (UGBS), Prof. Godfred Bokpin, insisted that blaming our economic challenges on the rating agencies will amounts to “majoring on the minor” as the issues with most developing economies particularly Ghana goes beyond these credit ratings by rating agencies. Whereas Prof. Bokpin did not deny that there could be biases in the credit ratings by these rating agencies, he said developing countries cannot blame the issue solely on rating agencies as there are external push factors and local pull factors which results in the economic misery of developing countries. He advised governments to rather focus on the internal pull factors which they can control so that they do not put their economies in a vulnerable position for rating agencies to downgrade it.
He lamented the situation where politicians have celebrated similar downgrades by same ratings agencies in the past only to turn around and cry foul when same ratings is applied to them when they are in power. He also advised governments to stop celebrating “kenkey party” when they issue Eurobonds and is oversubscribed as that does not necessarily mean the economy is doing well.
On his part, the president of Imani Africa, Franklin Coudjoe, in a Twitter Post said “Mr. President, if the known rating agencies are ‘reckless’ as you say in their assessment of your economy, why don’t you set up your own agencies and let them give you money?”
Since Akuffo Addo government took over the running of Ghana’s economy in 2017, the country has not seen any consistent favourable rating by global rating agencies, S&P, Moody’s and Fitch. Ghana has seen its credit ratings downgraded from B3 with a positive outlook by Moody’s in 2016 to Restricted Default (RD) by Fitch in April 2023, due to missed payments on certain local currency bonds issued prior to Domestic Debt Exchange Program (DDEP). This follows Ghana’s downgrade to Further Junk Status by Fitch in December 2022, which restricted Ghana from accessing the external bond market. In response, President Akuffo Addo slammed the rating agencies, describing their behavior as “reckless”.
Report by: Richard Kamba.t