Accounting and auditing firm, PwC, has expressed worry that the international ratings agencies may thrust Ghana’s bond ratings further into junk credit territory if negotiations with external creditors/ debt holders are not concluded expeditiously.
In its commentary on the 2024 Budget, it also warned that the investor community and financial markets may get jittery if the delay in securing the agreement continues.
“If negotiations with external creditors/ debt holders are not concluded expeditiously, the investor community and financial markets might get jittery, and the international ratings agencies may thrust our bonds ratings further into junk credit territory. Additionally, a more critical look at the microeconomic picture beyond the shiny macroeconomic data reveals less glamorous images”.
The Finance Minister, Ken Ofori-Atta, in the 2024 Budget illustrated the positive outturn in the first nine months of the year:
He said the economy is firmly on a disinflationary trajectory as headline inflation has dropped almost 1900 basis points from 54.1% to 35.2%, the cedi has remained stable due to the restoration of economic activity, whilst the Central Bank Gross International Reserve position has improved.
“Our thoughts? This all seems good. But we need to accept that it has come at a considerable cost to households and businesses. Further, the reported gains are due mostly to interventions that are only skin-deep at present, e.g. the debt standstill has saved us from making significant interest payments in debt service, which has spared the Ghana cedi a significant amount of pressure”, it responded to the Ministers claim.
For instance, Mr. Ofori-Atta references a banking industry that has reported after-tax profits of ¢6.2 billion, representing 43.8% growth.
But PwC said the question that begs an answer is “At what cost?”, saying “the Bank of Ghana’s Monetary Policy Committee (MPC) in September 2023 report observed that the annual growth rate of private sector credit over the 12-month period up to August 2023 was 10.7% compared to 35.8% over the 2021/2022 equivalent period. In real terms, private sector credit contracted by 21% compared to a growth of 1.4% in the equivalent comparable prior period.”
Additionally, it said the industry’s non-performing loans (NPL) ratio rose from 14% (August 2022) to 20% (August 2023), reflecting the poor performance of the real sector and the increased risk aversion of banks for the real sectors of the economy.
On revenue, it reiterated its position that the government should consider creative ways of roping the informal sector into the revenue mobilization net.
It added that the sector is huge, creates value, with most of which escaping the government’s tax dragnet, making government’s current taxation policy and administration approach inequitable.
On expenditure, the Finance Minister noted that the execution of an arrears clearance and prevention strategy aimed at bringing public finances back to a sustainable path of fiscal consolidation and optimisation.
PwC said it can’t agree with the Minister more that the Government intends to prevent the accumulation of new arrears.
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