The downgrade of Ghana’s credit rating over concerns of debt default by credit rating agency, Moody and the Finance Minister’s appeal to Ghanaians to be optimistic about a better future as the country would surmount the current challenges are some of the leading stories in the Ghanaian press on Tuesday.
The Graphic reports that credit rating agency Moody has downgraded Ghana’s credit rating over concerns of debt default.
The rating has moved to Caa2 from Caa1 and the agency said this “reflects the recent macroeconomic deterioration, further heightening the government’s liquidity and debt sustainability difficulties and increasing the risk of default”.
It added that “The initiation of the review for downgrade is prompted by the ongoing negotiations between the government and the IMF over a funding programme that may include a condition for debt restructuring to ensure debt sustainability.”
“Such a restructuring would likely be considered a distressed exchange and thereby a default under the rating agency’s definition. The review will evaluate the likelihood of a debt restructuring being a prerequisite to secure sufficient and durable financing from official sources to avert a fiscal and balance of payments crisis that is already unfolding”.
This follows last February’s downgrade to CAA1 from B3 – a move sharply criticised by the government. Ghana, one of West Africa’s largest economies, slammed Moody’s action.
In a statement, the finance ministry said it had appealed against that downgrade, adding that the rating agency’s concerns were largely addressed by fiscal consolidation measures outlined recently in its 2022 budget “anchored on debt sustainability and a positive primary balance.”
Last month, Fitch Ratings also downgraded Ghana’s Long-Term Local- and Foreign-Currency Issuer Default Ratings (IDRs) to ‘CC’, from ‘CCC’. It said the downgrade reflected the increased likelihood that Ghana will pursue a debt restructuring given mounting financing stress, with surging interest costs on domestic debt and a prolonged lack of access to Eurobond markets.
“There is a high likelihood that the IMF support programme currently being negotiated will require some form of debt treatment due to the climbing interest costs and structurally low revenue as a percentage of GDP,” Fitch said in the rating action commentary.
The newspaper says that the Minister of Finance, Ken Ofori-Atta, has asked Ghanaians to be optimistic about a better future as everything showed that the country would surmont the current challenges.
“These are difficult times for us as a country but as we keep saying, the battle is the Lord’s and it will be done,” Mr Ofori-Atta said at a ceremony to sign this year’s cocoa syndication loan.
He said the Ghana Cocoa Board’s (COCOBOD) ability to raise US$1.13 billion from a consortium of international lenders to finance cocoa purchases in the face of the economic downturn showed the faith that the international financial market have in the country.
He said the US$750 million raised from the Africa Export-Import Bank gave credence to that belief in the high prospects of the country.
He said the Afriexim facility “came through against other predictions and the cocoa loan too has come through at the right time
“So, I believe it is time for us to have the type of optimism that will raise Ghana and the black star to where it should be.
He, however, asked Ghanaians to prepare for burden sharing as the government steps up negotiations with the International Monetary Fund (IMF) for a fund-assisted programme to restore macroeconomic stability.
He said the discussions showed that the country could secure a historic deal different those secured by other African countries.
The Ghanaian Times reports that Pan African rating agency, GCR Ratings (“GCR”) has affirmed Ecobank Ghana PLC’s national scale long and short-term issuer credit ratings of A+(GH) and A1(GH) respectively, with a stable outlook.
The ratings on Ecobank Ghana PLC (“Ecobank Ghana”) according to GCR reflected a strong business profile supported by leading market shares, stable funding sources and good levels of liquidity.
The ratings also factor in improving capitalisation and improving asset quality risk.
According to GCR, the bank’s competitive position is strong, with a cost of funds of less than 2 per cent, benefiting from being part of the broader Ecobank Transnational Incorporated’s (“ETI”) group, which owns 68.93 per cent of the bank’s shares.
ETI is a pan-African conglomerate with banking operations spanning over 33 countries.
Ecobank Ghana’s approximate market share for deposits in full-year 2021 stood at 13.2 per cent (FY20: 13.1 per cent), while the gross advances market share stood at 11.0 per cent (FY20: 10.4 per cent), supporting its solid domestic footprint.
The bank’s revenue is stable, supported by a healthy internal capital generation of 29 per cent in FY21(FY20:35 per cent).
Total operating revenue grew from 985m in June 2021, to 1.186 billion in June 2022.
The growth was mainly driven by net interest income and general banking fees.
The cost-to-income ratio stood at 46 per cent in June 2022, in comparison to 39.6 per cent in June 2021.
Ecobank Ghana is adequately capitalised, with a GCR capital ratio of 20.6 per cent on December 31, 2021 (FY20:18.6 per cent), while also reporting a CAR above the D-SIB minimum regulatory requirement of 15 per cent.
However, the bank’s CAR ratio dipped to 16 per cent in June 2022, largely due to the single large dividend paid once a year, albeit it only will reflect in the third quarter of 2022.
The GCR capital ratio is expected to be around 20 per cent by the end of the year.
Although the bank’s asset quality has come under pressure due to the COVID-19 pandemic, the NPL ratio improved from 8 per cent at June 2021 to 5 per cent in June 2022.
The newspaper says that the Electricity Company of Ghana (ECG) has attributed recent power crisis to Information and Communication Technology (ICT) system challenges.
Although he did not confirm whether or not the system had been hacked, Managing Director of ECG, Mr Samuel DubikMahama, said the company had so far been able to restore operations of District Offices and third-party vendors within its operational areas to serve some districts in the Ashanti Region.
Addressing a press conference in Accra yesterday, he noted that work on ECG App would be completed by close of yesterday to enable customers purchase prepaid power through the platform.
He admitted the fault of the ECG in the current challenge and apologised to the customers for damages suffered as a result of the power outages.
“We at ECG admit that we are at fault for our inability to provide our cherished customers with power within the past few days. It is our mandate to serve you with power but we could not. For this reason, we apologise unreservedly,” Mr Mahama stated.
Currently, he said all vending points or stations were up and running except some few in the Ashanti region, and urged customers to visit the ones nearby to purchase their power.
He appealed to customers who have incurred damages to file their complaints with the Public Utility Regulatory Commission (PURC), adding that “we will look at compensation case by case”.
The ECG, he noted, has also suffered some losses as a result of the challenge, saying that it would be able to quantify its total losses after the system restoration exercise was completed.
Mr Mahama advised customers who engaged in any form of illegal connection during the period of outages to reverse the process to avoid suffering penalties or sanctions when the meter audit taskforce resumes its work.
He indicated that the company would soon roll out a programme to reduce the number of meter types, which currently stood at seven.
“It is technology so time and again new ones are developed to replace the old ones.
What we intend doing is to get to the point where we all use one type of meter. We will soon announce when and where the exercise will start,” he added.
GIK/APA