Ghana’s failure to narrow its budget deficit more quickly may add to debt, threatening a credit downgrade, Fitch Ratings said.
Plans announced yesterday to narrow the gap to 9 percent of gross domestic product in the 2013 fiscal year from 12.1 percent last year place the nation’s rating of B+ at risk of a cut, Carmen Altenkirch, a London-based sovereign analyst at Fitch, said in an e-mailed note today. Fitch expected the government to close the gap to 8 percent and 5 percent next year. The deficit ballooned last year from a revised estimate of 6.7 percent in July. The rating is four levels below investment grade.
“Failure to stick to the budget’s less-than-ambitious fiscal consolidation plan will further increase concerns about Ghana’s long-term creditworthiness,” Altenkirch said. “Failure to set out and implement a credible consolidation plan and improve expenditure control could lead to a downgrade.”
Fitch placed a negative outlook on the oil producer’s credit rating last month, indicating a cut on the rating may happen if fiscal conditions don’t improve. Increases in government salaries, higher interest costs to pay debt and spending ahead of December elections eroded the government’s ability to narrow the deficit, Fitch said.
The economy will expand 8 percent this year and 8.7 percent next year, Finance Minister Seth Terkper said yesterday as he presented his budget to lawmakers in Accra.
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