Contributing economists knocked 0.1 points off the countrys government finances score last week, cementing concerns over the countrys debt sustainability and budgetary requirement.
The score downgrade has resulted in Ghana falling one place to 78th in the ECR global rankings. It means the countrys government finances score (3.6 points) is now at an all-time low and below that of other African countries to have issued Eurobonds (see graph).
Fiscal slippage following last years presidential elections appears to be the largest contributory factor to the sovereigns rising debt burden, according to a credit report by Moodys. We expect the government's fiscal space to remain impaired over the medium term following the dramatic deterioration in its balance sheet in the run-up to the presidential election last December, the rating agency noted in a recent report.
An overspend on public sector wages, lower than expected corporate income tax receipts and fuel subsidies resulted in the government overshooting its fiscal deficit target by 5.1% of GDP last year, after peaking to 11.8% of GDP.
The IMF noted in a recent report that: A large current account deficit, growing public debt and a low official reserve buffer all expose the economy to significant stability risks. A rising public sector wage bill and costly energy subsidies led to a near tripling of the cash deficit to 12% of GDP in 2012.
The governments social spending commitment left the countrys general government debt at 56.5% of GDP in 2012, well above the B median threshold of 37%.
The recent score change reflects the consensus view among observers that the government must look towards savings in public expenditure and the optimization of revenue collection streams in the oil and mining sectors, while simultaneously closing tax loopholes in order to avoid the risk of further downgrades.
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