Ghana downplays rating downgrade by Fitch

The government of Ghana has downplayed the latest rating downgrade by international rating agency Fitch.It said the Fitch's downgrade announced earlier in the day did not sufficiently reflect Ghana's structural measures and deep reform efforts, notably in public financial management.The global credit rating agency announced its latest rating of the West African gold, cocoa and oil exporting country,thermos flask reducing the sovereign rating to B from the B+ it held since February 2013.It cited the fiscal deficit of 11.8 percent in the implementation of the 2012 budget against the projected six percent.Fitch attributed these to the over-run of wages, interest costs and arrears with fears that the Current Account deficit would widen to 13.1 percent in 2013 from 12 percent in 2012."Ghana's creditworthiness has been further weakened by the government's failure to fully implement its fiscal consolidation plan in 2013. This follows a sharp widening in the budget deficit to 11.8 percent of GDP from four percent in 2011," Fitch said.Ghana's external vulnerability has increased since the rating was last reviewed in February 2013. Fitch forecasts that lower gold prices and still strong import demand will put further pressure on external balances, said the agency's statement.Fitch does not expect capital inflows to move along with the widening current accounts deficit,beilin-bearing which will maintain pressure on foreign reserves.The rating agency also gave the economy a stable outlook from a negative outlook it gave in February, but does not expect capital inflows.It however expressed worry about Ghana's rising debt levels as well as a debt to GDP ration reaching 48.8 percent in 2012 from 38. 8 percent in 2011. 

The government has projected and believes it has been working hard to record a budget deficit of nine percent, while the economy is expected to grow at eight percent.This year has seen progress in fiscal consolidation after last year's deficit as part of the necessary steps to address long- standing issues that have plagued Ghana, said a statement issued by the Ministry of Finance, shortly after the Fitch announcement."The government has worked tirelessly to address the many challenges the country faces, all against a weak global economic environment (which recently resulted in significantly lower gold and cocoa prices) and a year-long power shortage due to the disruption of gas supply from the West Africa Gas Pipeline," the statement added.It added that, "moreover,vacuum bottle we have taken these actions with a balanced approach; mindful of the need to ensure Ghana's economy continues to grow."In the government's estimation, the gradual increase in oil and gas production, which is significantly higher this year than in 2012, value addition and diversification plan to boost agriculture, in particular; as well as a vibrant and growing services sector were still driving the projected annual economic growth rate of 7. 0 percent to 8.united-promo0 percent over the medium term. 

"It is in this regard that the government launched its 3-year fiscal consolidation plan to boost a very strong economic environment and outlook. Hence, despite the challenges it faced,vacuum flask Ghana's growth is expected to remain above a healthy 7 percent at end-2013," the government stressed.It conceded that the largest issue it must address is the wage bill, which was a major reason behind last year's deficit and continues to limit fiscal flexibility."Implementation of the Single Spine Salary System has been necessary but difficult. While it has entailed higher than expected fiscal outlays, it is nearly complete and will form the basis for a more controlled wage bill in the future," the statement responded.Analyst Collins Appiah of NDK Asset Management in Accra commented that high fiscal deficit was the major challenge to economic management by the government. He attributed this to the high wage bill by an under-performing public sector."This, coupled with the 'ghost names' on the pay role has created the situation where over 70 percent of tax revenue is spent on wages," Appiah observed.He called on the government to deepen the conducive environment so that the private sector can grow and employ more people, while the government puts all non-performing employees on retrenchment, to lessen the wage burden on the state.