Government is working assiduously to ensure risks and challenges in the economy are curtailed despite the positive outlook rating of the Ghanaian economy by international credit ratings agency, Moody’s, the Finance Ministry has said in a statement.

The government said it will continue to work with its partners to consolidate the gains made in the economy.

Moody has reaffirmed Ghana’s credit rating at B3 with an upgraded outlook to positive from stable. This credit rating position is the best Ghana has received from Moody’s in the last decade.

A statement issued by Moody on Friday, 24th January 2020 stated that “Moody’s investors Service (Moody’s) has today reaffirmed the Government of Ghana’s long-term issuer and senior unsecured bond ratings at B3 and changed the outlook to positive from stable.”

The statement continues that “the decision to assign a positive outlook reflects Moody’s rising confidence that the country’s institutions and policy settings will foster improved macroeconomic and fiscal stability over the medium term, in part as a consequence of the reforms implemented under the recent IMF reform program. Those reforms are beginning to bear fruit, as seen for example in the return to primary fiscal surpluses, measures to smooth the debt maturity profile and increasingly sustainable growth prospects.

“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”.

In response to this development, the Finance Ministry on Monday January 27 said: “Despite these positive developments, Government is working assiduously to ensure risks in the outlook are curtailed. Government is committed to working with its partners and stakeholders to address risks emanating from contingent liabilities especially within the energy sector. To complement these efforts, government’s vision of a ‘Ghana Beyond Aid’ is to transform Ghana into a self-sufficient economy.”

The statement further indicated that the positive rating was due to, among other things, a strong GDP growth performance and outlook as well as proactive debt management.

“The change in the outlook for Ghana’s ratings from stable to positive is predicated on a number of factors. Key among the factors are the following;

“Strong GDP growth performance and outlook. A key supportive factor for Ghana’s ratings was the significant increase in GDP growth of 8.1% and 6.3% in 2017 and 2018 respectively, up from the slowdown of 2.9%, 2.2% and 3.4% in 2014, 2015 and 2016 respectively. For the first nine (9) months of 2019, real GDP recorded a strong average growth of 6.0% on the back of both oil and non-oil sector performance albeit with significant external headwinds during the same period.

“Macroeconomic stability restored despite global and domestic challenges. The macroeconomic environment has improved significantly since 2017. Inflation has eased gradually from 17.7% in 2015, 15.4% in 2016 to 7.9% (new series) as at December 2019. This is largely due to the continuous fiscal consolidation policy drive, a tight complementary monetary stance, and relative stability in the exchange rate.

“Fiscal consolidation sustained post completion of IMF programme. Provisional data post IMF programme completion, indicates that the fiscal position for 2019 recorded a deficit of 4.8% of GDP against a revised target of 4.5% of GDP. The primary balance also recorded a surplus of 0.9% of GDP which is the first time in decades that we have recorded three (3) continuous years of positive primary performance. The fiscal performance is therefore within the Fiscal Responsibility Act (FRA) conditions of a deficit threshold of 5% of GDP and a positive primary balance.

“Proactive Debt Management following risk from Financial and Energy Sectors. The provisional public debt as a percentage to GDP is 62.11% as at the end of November 2019. Excluding the financial sector bail-out, the ratio drops significantly to 59.2% of GDP. Proactive debt management post IMF programme completion includes continuation of liability management of the current stock of debt, transparency in debt operations by publications of Annual Debt Reports (ADR), Annual Borrowing Plan (ABP), Annual Medium Term Debt Strategy (MTDS), and frequent interactions with the public and market participants among others. Another significant development is the institutionalisation of limits on Commercial Borrowing as part of the annual budget process and implementation of a credit risk assessment framework for SOEs and other stakeholders requiring sovereign guarantees.”