A Professor of Finance and Economics at the University of Ghana, Godfred Bokpin, has warned that Ghana’s improving credit ratings are being driven by painful austerity measures rather than immediate economic relief for citizens.
His comments follow the decision by Fitch Ratings to upgrade Ghana’s Long-Term Foreign-Currency Issuer Default Rating from ‘B-’ to ‘B’, with a Positive Outlook.
Fitch attributed the upgrade to a sharp decline in Ghana’s public debt, improved fiscal discipline, strong economic growth, the appreciation of the cedi and a significant increase in international reserves.
The ratings agency also projected that Ghana’s public debt would decline further to 46% of GDP by 2027, placing the country below the average for economies with similar ratings.
Speaking on Citi News Digest on Saturday, May 9, Prof. Bokpin said the development was expected because the government had deliberately aligned its policies to improve Ghana’s standing with international rating agencies and investors.
“We had expected this, so I am not surprised. In fact, as of October last year, Ghana had made significant progress on many of those rating indicators, if you look at the rating methodology,” he said
According to him, the government’s fiscal and monetary policies have largely focused on “balancing the books” by aggressively cutting expenditure to improve debt levels and key macroeconomic indicators.
He explained that, unlike previous governments, which relied more on revenue mobilisation while maintaining spending levels, the current administration has adopted what he described as expenditure-based fiscal consolidation.
Prof. Bokpin said the strategy may produce attractive economic figures in the short term, but warned that it comes with significant sacrifices.
“When you switch to expenditure-based fiscal consolidation, in the immediate, your books may look good, and the numbers may look very appealing, but you have sacrificed so much,” he said.
He argued that reduced spending on infrastructure and other critical sectors could negatively affect the economy in the medium to long term.
Fitch Ratings upgrades Ghana’s credit rating to ‘B’ with positive outlook
