Associate Professor of Economics at the University of Ghana, Professor Eric Osei-Assibey says international rating agency, Fitch, downgrading Ghana’s credit rating amidst a raging pandemic is only going to worsen Ghana’s economic woes.

According to him, Ghana like many other countries has been going through a rough patch since the start of the Covid-19 pandemic, thus the downgrade of the country’s credit rating opens the country up to more challenges as it tries to raise money on the international market.

Speaking on JoyNews’ PM Express, Prof. Osei-Assibey said Fitch’s rating is injurious to the already fragile economies of developing countries and thus should be checked.

“I am of the view that sometimes Fitch doesn’t help developing countries or emerging economies like Ghana in the sense that we all know the problems that countries especially emerging countries have gone through as a result of the Covid and all the related issues.

“And now having a pro-cyclical approach to ratings, that is coming in to give positive when the economy is doing well and coming in to give negative outlook when the economy is not doing well is almost like a self-fulfilling prophesy, in a sense.

“Because the market thrives on information and expectations and so any little information can either go to aggravate the situation or actually make the situation better depending on the kind of information that they put out,” he said.

He further explained that there are two possible outcomes of Fitch’s decision.

The first of these outcomes will be that cost of borrowing will go up.

“Cost of borrowing will definitely go up because the sovereign spread will increase,” he said.

The second outcome will be that investors will begin to withdraw their funds from the economy.

“Now when they do that, they cause a shock to the macroeconomic environment and so you’re going to see your fiscal deficit deteriorating further, you’re going to see your currency depreciating much faster and then in effect it worsens the already bad situation,” he said.

“So I think that the timing in my view is not good and Joseph Stiglitz said it during the financial crisis time that most of these rating agencies, the time that they come in, they’re often unfounded, they’re not justified and they tend to worsen these countries’ economic situation in most cases apart from looking at the conflict of interest issues that one can talk about,” Prof. Osei-Assibey said on PM Express, Monday.