The African Peer Review Mechanism (APRM), a panel backed by the African Union (AU) has called on Moody’s Investors Service to review an appeal by the Government of Ghana on the agency’s recent downgrade of the country’s debt outlook.

According to the Panel, the technical inaccuracies and nature of the assessment by the agency have the potential to discount the strength of fundamentals in Ghana, and frustrate government’s efforts in fiscal consolidation.

“Moody’s should review the appeal by the government of Ghana against an inaccurate credit downgrade, as provided in the agency’s own ‘Procedures and Methodologies Used to Determine Credit Ratings’,” the APRM said in a statement on Tuesday.

On Sunday, February 6, the Finance Ministry questioned and appealed Moody’s decision to lower the country’s long-term debt from B3 to Caa1 with a stable economic outlook.

The government criticised the assessment and cited the omission of key material information such as the 2022 Budget expenditure control measures and the 2022 upfront fiscal adjustments.

Following the rejection of the appeal, the APRM has stated that the ratings agency did not pay due attention to the issues the government raised.

“Taking such a major rating decision that threatens debt sustainability of the country should be treated with seriousness…Moody’s have failed to do that.”

“Rejecting the appeal by the government of Ghana on the omissions and inaccuracies of key material information driving Moody’s decision and proceeding to issue the rating is evident of the unregulated and irresponsible use of power by international credit rating agencies,” the African Peer Review Mechanism added in its statement.

Below are some recommendations by APRM:

  • Moody’s should ensure sufficient analyst presence in Ghana through field visits to fully understand and evaluate Ghana’s economic and political environment.
  • Moody’s analyst should not make haste rating decisions that may be complicated to correct, at the expense of government’s creditworthiness.
  • The Government of Ghana must enact legislation to enhance supervision and regulation of international rating agencies.
  • Enhance the regulatory and supervisory powers of the Ghana Securities and Exchange Commission (SEC) to be at par with international requirements and to be in line with the G20 requirement of regulated and accountable credit rating agencies at a global level.

Meanwhile, the Finance Ministry has called for reforms in the conduct of rating agencies given their ownership structure and the ramifications that their actions have on countries, especially in Africa.