Moody’s Investors downgrades Ghana’s credit rating
Ghana’s credit rating has received another blow from Moody’s Investors Service, a leading provider of credit rating, research and risk analysis, because of fears that falling oil prices will have a negative impact on the budget deficit.
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Moody lowered the country’s foreign currency rating one step to B3, which is six levels below investment grade.
The grade gives Ghana a negative outlook which also means that the country is seen as a high credit risk.
While Moody’s outlook is not promising, Standard and Poor’s assesses Ghana at an equivalent B-, while Fitch Ratings has it one grade higher, at B.
The move is the second downgrade by Moody’s in less than a year for a nation that has agreed to a $1 billion loan from the International Monetary Fund (IMF).
Although Ghana imports more oil than it exports, the country also depends heavily on revenue from oil export to finance the budget.
Ghana is struggling to do better with its inflation figures, hanging at 16.5 per cent, while at the same time struggling with a cedi that is depreciating against the major trading currencies, and ranked as Africa’s worst-performing currency after Zambia’s Kwacha.
The Minister of Finance, Mr Seth Terkper, painted a not-too-good picture of the country’s budget deficit when he addressed Parliament last week but indicated that the outlook of the short to medium term looked good.
He projected that the country’s budget deficit would be wider than estimated.
The target for this year is 7.5 per cent of gross domestic product, instead of 6.5 per cent forecast in November.
The cedi fell more than 30 per cent against the dollar last year and Standard & Poor's cut the country's rating in October last year, expressing doubts about the government's ability to reduce the deficit.
The country’s budget last year targeted inflation of 11.5 per cent in 2015 and aims to bring the budget deficit down to 3.5 per cent of GDP by 2017.
With lower oil prices staring it in the face, the government cut its 2015 projected oil revenue to GH¢1.5 billion from GH¢4.2 billion when the budget was presented in November last year.