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Credit rating reports are important for governments as they determine whether the possibility to borrow at cheaper costs may exist. Indeed upgrade by the three major credit rating agencies should be good news though not potent to change economic management narratives. Ghana’s credit rating has been at B from B- since late 2016 by Moody and again in May 2017 by Fitch all with stable outlook. The September rating by S&P at B with stable outlook after a year on account of Fitch means Ghana has not really improved.
The current rating is not based on improved revenue and expenditure performance but on potential stability of the banking sector when recapitalization is completed in December 2018. Effectiveness of monetary policy cannot be seen only in the reduction of policy rate as other rates crucial to sectors of the economy are not a true reflection of effective monetary policy engagement. The risk of high public debt stock , weak revenue performance and contraction of expenditure from public investment are eminent.
Weak monetary policy and fiscal policy transmission benefits are the same as a year ago when Fitch rated Ghana B with stable outlook.
The implication therefore is that government expenditure programs should be improved and debt stock should moderate.
Government should find a way to ensure that narrow deficit with improved BoP influence the performance of the currency.
Affirmation of the B stable outlook within a year clearly defines where to focus monetary and fiscal policy management efforts as B rating since late 2016 did not provide the answers citizens are expecting.
By Prof John Gatsi