S&P cuts Ghana’s foreign currency debt to CC from CCC+

S&P Global recently downgraded Ghana's long-term local currency bonds to selective default and lowered the country's foreign currency debt rating to CC from Triple C+. This move has posed significant challenges for the fiscal authorities in Ghana. The Minority Caucus of Ghana's Parliament has expressed strong opposition to the revenue mobilization measures outlined in the approved 2023 budget. Derrick Mensah, Head of Client Coverage at IC Asset Managers, joined CNBC Africa to discuss the implications of these developments.During the interview, Mensah highlighted that the rating downgrade was somewhat anticipated, especially following the announcement of a debt exchange. He mentioned that the revenue targets in the 2023 budget appeared overly optimistic and that the proposed measures might be difficult for citizens to bear, particularly given the economic hardships expected in the coming year. Despite the pushback from the opposition, Mensah emphasized the necessity of implementing these revenue measures to achieve the targets set in the budget. He acknowledged that ongoing discussions with the IMF added a layer of complexity to the situation, making it imperative for the government to address the fiscal challenges promptly.As the conversation delved into potential solutions, Mensah stressed the need for a balanced approach involving both expenditure cuts and revenue enhancements. He noted that while the budget primarily focused on revenue generation, there was room for improvement in terms of cutting high levels of expenditures to ensure debt sustainability. Mensah cautioned that the current measures might not yield the anticipated results, leading to possible fiscal slippages and the need for a supplementary budget down the line, especially when the IMF program takes effect.The discussion underscored the tough decisions ahead for Ghana's fiscal policy makers as they navigate the delicate balance between revenue mobilization and expenditure control during a challenging economic period. Mensah's insights shed light on the importance of striking a strategic balance to address the country's fiscal woes effectively. As Ghana grapples with the aftermath of the debt rating downgrade and prepares for potential IMF support, the path to fiscal resilience will require decisive actions and prudent financial management strategies.