Fitch, the international credit rating agency, has downgraded Ghana from a B+ to a B, largely because of the country’s handling of its wage bill.
Sources close to the rating agency have told the Daily Graphic that a formal announcement will be made today.
Ghana was put on a B+ (negative) outlook in February this year and has since been under continuous assessment by Fitch.
The sources said the country’s economy had been under close monitoring by the rating agency, which had expressed concern over several factors affecting the short-term health of Ghana’s economy.
It is believed that Fitch is worried that the government’s difficulty in managing the rising wage bill and the increased debt to GDP ratio pose short-term challenges to the economy.
While experts recognise Ghana’s bright prospects in the medium term, it is believed that the government will struggle with controlling the fiscal situation over the next 18 months.
“The outlook for post-2015 looks much better,” the sources said, citing Ghana’s removal of subsidies on petroleum products as helping the fiscal situation, but continued subsidies on utilities, especially power, posed challenges for fiscal stability and growth going forward.
Ghana’s debt to GDP is currently estimated to stand about 49.3 per cent, according to President John Mahama, speaking at the 4th Ghana Policy Fair.
The government, he said, would only implement projects that had the potential of transforming the lives of the people.
“Prioritisation is the name of the game. Our current debt to GDP ratio is estimated at 49.3 per cent. While there is a strong need to borrow to satisfy the high demand for infrastructure development, I wish to assure all that we will keep our debt profile within reasonable limits,” he said.
President Mahama also restated his assurance to Ghanaians that the current economic challenges were temporary, promising that his government would not be reckless with the management of the economy, in an apparent reference to the debt sustainability ratio.
“We may be facing temporary challenges, but measures have been put in place to overcome these and the economy is responding positively,” Mr Mahama added.