Minority Leader in Parliament Haruna Iddrisu says the country is facing an imminent downgrade by international credit rating agencies.
“The financial and economic impact of Covid-19 remains as elusive as the infection itself,” he told Joy News after Parliament approved a $1 billion IMF loan for government to cushion the economy against the impact of the pandemic.
“We cannot predict what the uncertainties will be. But I can speak without fear of contradiction that in the foreseeable future, Ghana’s economy is likely to be downgraded just as it happened to South Africa,” Mr Iddrisu observed.
Late last month, rating agency Moody’s cut South Africa’s sovereign credit rating to sub-investment grade, meaning the country now has a junk rating from all three major international rating agencies (Moody’s, Fitch and Standards & Poor’s).
Moody’s said the unprecedented deterioration in the global economic outlook caused by rapid spread of the Coronavirus outbreak will exacerbate South Africa’s economic and fiscal challenges and complicate the emergence of effective policy responses.
The Minority Leader forsees Ghana suffering a similar fate, noting, “without any fear of contradiction, in a fortnight to a month, we should see that happen to the Ghanaian economy. What I cannot predict is the extent of downgrade.”
“I pray we stay in a range that’s still respectable. But the fundamentals of our economy is being shaken to its core because we simply do not have the muscle to accommodate the growth deficit, fiscal deficit and revenue deficit,” Mr Iddrisu observed.
“But essentially, we need to keep together to turn the economy around as the next secondary challenge if we are able to contain the primary challenge of protecting Ghanaian lives by way of preventing and managing Covid-19,” he told Joy News.
Moody’s in its assessment of Ghana earlier this year affirmed the nation’s B3 rating and altered the outlook from positive to stable. The quality of credit rating predicts a nation’s credit worthiness and influences investor confidence in the economy.
Parliament approves $1billion IMF loan for Ghana
Finance Minister Ken Ofori Atta on Friday night moved a motion for parliament to approve a $1 billion (¢5.5 billion) International Monetary Fund (IMF) Rapid Credit Facility (RCF) to mitigate the impact of the Covid-19 pandemic on the economy.
Chairman of Parliament’s Finance Committee Dr Mark Assibey Yeboah disclosed to MPs ¢1 billion of the amount will be used to pay for the Covid-19 electricity subsidy for Ghanaians announced by President Akufo-Addo.
The rest will be used to help close the financing gap in the economy that has been created by the Covid-19 pandemic through shortfalls in revenue and additional expenditures in the fight against the pandemic.
Mr Ofori-Atta told MPs the country’s economic decline will take some years before things get better.
“No country has enough physical space to confront this challenge alone… For Africa, we will have a steep decline, then a sloping curve downwards, before a steep recovery. We must get ourselves ready,“ he noted.
The Finance Minister disclosed an agreement has been reached with the World Bank and International Monetary Fund to defer interest payments on loans by African countries so economies will have enough space to maneuver.
“With the support of the G-20, the interest payment will be deferred for nine months. And we are going to push for at least two years,” Mr Ofori-Atta told MPs.
On the Floor of Parliament, Haruna Iddrisu urged the Finance Minister to come up with a roadmap on how businesses can be supported in these difficult times.
“Companies in Ghana are likely to go bankrupt. Companies are struggling to pay their workers…. What are we doing in Ghana for Ghanaian companies?” he quizzed.
“Small Medium Enterprises (SMEs) contribute about 80 to 90% of the country’s GDP… What is our strategy as a country to support struggling SMEs that are suffering as a result of the Covid – 19?
“What package do you have for Ghanaian businesses in the hotel and tourism industry? Minister, we need an elaborate roadmap from you,” he added.
The Minority Leader observed it could take up to five years before the Ghanaian economy recovers from the impact of Covid-19. He said the $1 billion from the IMF will not be enough to cushion the economy.
“The country will need not less than $5 billion. Just for the management of the Ghanaian economy. Just as a result of a loss of revenue… or probably even more. It will affect the budget… not just growth,” he said.
He called for prudence in government expenditures. “Whilst the US and other advanced countries can boast that they can do whatever it takes to save the economy because they have the money, we can only spend what we have…” the former Minister for Trade and Industry added.
Parliament has meanwhile suspended sitting indefinitely after the 1 day sitting to approve the IMF loan and the appointment of Dr. Bernard Oko Boye as Deputy Minister for Health.