The global and international credit ratings agency, Standards and Poor’s (S&P) has upgraded Ghana’s credit score from ‘B’ minus to ‘B’ with a stable outlook.
At the same time, they have revised Ghana’s transfer and convertibility (T&C) assessment to ‘B+’ from ‘B’.
In it’s latest release on the credit ratings of Ghana, S&P Global indicated that “the upgrade reflects our assessment that Ghana’s monetary policy effectiveness has improved, albeit from a low base, and will support the credibility of the inflation-targeting framework over the period”.
The stable outlook balances Ghana’s fairly robust growth prospects, decreasing inflation, and narrower current account deficits against risks from still-high budget deficits and a high stock of public sector debt.
“We could lower our ratings if Ghana’s economic growth is significantly lower than we expect and if its policymaking effectiveness were to weaken, for example if fiscal deficits were to be materially larger than our expectations. We could consider raising our ratings if Ghana implements and adheres to measures that materially alleviate pressures on public finances and reduce public debt levels beyond our expectations. We could also see prospects for an upgrade if the current account deficit narrows faster than we expect and external debt and gross external financing needs are significantly reduced,” the report indicated.
In justifying the rational for the new upgrade, the report mentions among others that “the upgrade reflects our assessment that Ghana’s monetary policy effectiveness has improved, albeit from a low base, and will support the credibility of the inflation-targeting framework over the period.
“Having peaked at a seven-year high of 19.2% (year-on-year) in March 2016, headline inflation has continued to decline to 10% by mid-year 2018, supported by a relatively tight monetary policy stance. In our view, the Bank of Ghana’s (BoG) policy rate has also been fairly effectively transmitted through the financial system to market participants. The government’s recapitalization of the banking system in 2018 is a fiscal expense weighing on our fiscal assessment, but should ultimately strengthen the banks and allow them to support financial intermediation in the economy.
“The ratings are supported by our monetary policy assessment and our view of Ghana’s fairly robust economic growth prospects. The ratings remain constrained by weak public finances from both a stock and flow perspective, sizable contingent liabilities, the country’s low GDP per capita, and high external debt levels”.