Dean of the Business School of the University of Cape Coast (UCC), Professor John Gatsi, has labeled the country’s Central Bank as a “tool of propaganda” being used by the current government.
Prof. Gatsi’s assertion is premised on the Central Bank’s blame game and continuous association of the country’s loss of access to the international capital market to the successive downgrades of Ghana’s creditworthiness by the world’s three most popular credit rating agencies – Moody’s, Fitch Ratings and S&P.
Prof. Gatsi in a Facebook post which he titled Credit rating and BoG position disturbing, averred the Bank of Ghana is creating a false impression about credit rating through its continuous blame of Moody’s, Fitch Ratings and S&P for the country’s loss of capital market access.
In an earlier interview, the Governor of the Bank of Ghana (BoG), Dr Ernest Addison, described as a “rude shock” the downgrade of Ghana’s creditworthiness by Moody’s, Fitch Ratings and S&P.
Making the assertion on the sidelines of the ECCB 40th anniversary and Central Banking Autumn meetings in Saint Kitts and Nevis, the Governor noted the downgrades immediately led to a loss of market access for the country.
“At the end of 2021, inflation was at 12.7%. We had started tightening monetary policy rates in 2021, far ahead of the US Fed – and at a time when a lot of other central banks were still in accommodative mode and not tightening policy. We raised the policy rate by 100 basis points in November of 2021. But in February 2022, we had a rude shock when Moody’s followed by Fitch and S&P downgraded Ghana’s creditworthiness.
“That immediately led to a loss of market access, and it became clear to everybody who knew the Ghanaian economic indicators that this was going to be a difficult period. As a result, the central bank had to provide some accommodation. But, even then, we managed it quite well. For the first three months of the year, the access levels were not significant.
“By the second quarter, however, things began to change. The currency took a severe hit because of significant portfolio outflows and heightened speculation about an IMF programme. Because of the strong stance of not going to the IMF, we began to lose reserves and government spending was far in excess of its revenues, including debt-service payments – we had to continue to service debt even though we had lost access to the market. This is why the central bank lost close to $3 billion reserves in 2022,” the Governor remarked.
Ghana, given the prevailing economic crisis with inflation shooting up to 54% and the cedi losing around half of its value within a year coupled with impending default on coupon payments, saw the three rating agencies downgrade Ghana’s bonds to junk status and assigning a “restrictive default” rating to the country’s creditworthiness.
The country’s creditworthiness has now been upgraded to “CCC” rating status.