Ghana’s economic fundamentals remain strong; we’re not facing imminent external imbalances – Finance Minister

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The Finance Ministry has dismissed claims that Ghana’s economic fundamentals remain weak amidst threats of imminent external imbalances.

According to a statement issued by the Ministry, despite global challenges posed by COVID-19 especially in emerging markets, the country’s fundamentals are solid as attested to by the growth in the third quarter of 2021.

This comes on the back of news reports by Bloomberg that Ghana’s debt is moving deeper into distress with investors losing patience.

Fitch downgrades Ghana’s credit rating from B to B- with negative outlook

But that assertion has been rubbished by the Minsitry which argues there are some serious factual errors in the article, which may give investors some cause for concern, if not corrected.

“For example, Bloomberg stated 81.5% as end of year debt to GDP ratio. This is incorrect. Our provisional nominal debt to GDP, as at the end of November 2021 was 78.4%, which is the latest data available. December revenue collections are seasonally the largest for any year, it is unlikely that our financing requirements in December will result in us exceeding 80% debt to GDP by December 2021,” it stressed.

“The Bloomberg article gave wrong historical debt to GDP figures. It is essential we make the correction that Ghana’s debt to GDP figures a decade ago were 39.67% and 47.80% for 2011 and 2012, respectively, and not 31.4% as stated in the Bloomberg publication. Again, it is important to note that for the period prior to the COVID-19 global pandemic, Ghana experienced an average debt-to-GDP ratio of 56.4% from 2015 to 2019. In 2020, Ghana’s GDP grew by 0.4% because of the impact of the Covid-19 Pandemic on the economy,” it noted.

Painting a positive outlook of the economy, the Ministry said the country’s “reserves, at over 5 months of import cover, is well above our internal target of four months and better than the average over the previous two decades. Foreign financing of the 2022 Budget, of $1.5 billion is also bolstered by the balance of Special Drawing Rights of approximately $700 million.”

“……like all emerging market countries with foreign investor participation in our domestic debt, Ghana is susceptible to a tighter US Monetary Policy stance. However, Ghana has healthy reserves of over 5 months of import cover amidst reduced levels of foreign investor participation in our domestic market. As of November 2021, our data indicates that only 16.55% of our domestic debt is held by non-residents investors as compared to 38.44% and 30.01% in 2017 and 2018, respectively,” it pointed out.

Explaining further, it said “whereas we acknowledge that the current trading levels of our Eurobonds have widened, we do not believe that it is warranted nor do we believe that it reflects the strong underlying fundamentals of the Ghanaian economy and our rapid rebound post the Covid-19 pandemic as evidenced by the healthy Gross Domestic Product growth of 6.6% for the third quarter alone and an average of 5.2% for the first three quarters of 2021. While the end year growth targets for 2021 has been revised to 4.4%, high-frequency indicators suggest a continued strong momentum in economic activity in the fourth quarter.

SourceABC News

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