Ghana Stock Exchange to establish credit rating agencies in Ghana by June

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The Ghana Stock Exchange (GSE) will, by the middle of this year, establish credit rating agencies in Ghana.

Agencies should rate the bond issue to provide some confidence and comfort to investors, the GSE said.

The Managing Director of GSE, Mr. Ekow Afedzie told reporters in Accra on Tuesday February 15 that the setting up of one of the agencies is almost complete and will start operations soon.

“It’s important because as far as the image of the company is concerned, the investor will want to know the rating of this company before making a decision. In other words, everything the rating agency says will guide the investor in the investments he makes. So for the Stock Exchange we are just looking at bonds and how we can have credit rating agencies in Ghana to help develop the market,” he said.

He added: “The Security and Exchange Commission (SEC) has developed guidelines for the licensing of credit rating agencies. I understand that one of them has been terminated, there is another one that is being developed by a group.

On his part, Mr. Augustine Simons, Head of Ghana Fixed Income Market, revealed that suggestions have been made for the GSE, National Pensions Regulatory Authority (NPRA) and State Insurance Commission (SIC) to hold shares in these agencies.

“By the middle of this year we should have the credit rating agencies, the entity established, they should start operating, have an office that they are going to operate. It has been suggested that the NPRA, the NIC and the GSE take stakes and actions in this area.

The development comes as President Nana Addo Dankwa Akufo-Addo attacked international credit rating agencies at the African Union summit in Ethiopia.

Mr. Akufo-Addo indicated that the work of rating agencies has affected the cost of and access to capital markets for African countries, and has during this COVID period resulted in the downgrading of many African countries, exacerbating even more their funding problems.

He called on African Union Member States to work collectively to reform the global financial architecture, as well as to build and strengthen the Union’s financial institutions.

Presenting his second report to the Assembly on Sunday, February 6, 2022, in his capacity as the AU Champion for Financial Institutions, President Akufo-Addo noted that the AU is currently engaged in the process of establishing four (4) financial institutions (AUFI). , namely the African Central Bank (ACB), the African Investment Bank (AIB), the African Monetary Fund (AMF) and the Pan-African Stock Exchange (PASE).

According to the President, “The main challenges to the establishment of AUFIs include the slow pace of signing and ratifying legal instruments, and the limited capacity of Member States to fund the establishment of AUFIs. Unfortunately, none of the AUFIs has reached the minimum number of ratifications required for the enabling legal instruments to enter into force and, therefore, facilitate their substantial implementation.

This, he explained, is detrimental to the operationalization of the African Monetary Institute, which is the first step towards the establishment of the African Central Bank.

President Akufo-Addo thus presented a number of recommendations to the AU Assembly for its adoption and approval, which he said “would be essential to the establishment of the AUFIs.” They have been recorded in the Assembly’s draft decision which will be submitted to Your Excellencies for consideration and adoption.

“We appreciate this commitment to additional resources, which our continent badly needs. It is regrettable, however, that the only proposal that has been put on the table by European countries so far is to redirect these SDRs through a single institution, the International Monetary Fund (IMF),” he said.

President Akufo-Addo continued: “The IMF should not be the sole beneficiary of such a shift. We believe that our own continental institutions, such as the African Development Bank (AfDB) and Afreximbank, should be the beneficiaries of recycling these SDRs. Our finance ministers and the United Nations Economic Commission for Africa (UNECA) have called for the use of regional development agencies to be included in this reorientation.

He told the Assembly that African finance ministers, together with the ECA, have always championed the allocation of SDRs to capitalize the AfDB and AfreximBank, to help establish an African stability mechanism and to launch a support facility for liquidity (LSF).

“We need to guard against the consecutive and continued takeover by rating agencies, which has affected the cost of and access to capital markets for African countries, and has, during this COVID period, led to the downgrading of the rating. many African countries, further exacerbating their funding challenges,” President Akufo-Addo said.

His comments come at a time when the Government of Ghana, through the Ministry of Finance, said Moody’s downgrading of the local economy to Caa1 smacks of contradiction.

In a statement issued on Sunday, February 6 in response to the downgrade on Friday, February 4, the ministry said the government found it difficult to understand the international credit rating agency’s assertion about the deterioration in the institutional strength of the Ghana given Ghana’s reputation as a beacon of democracy in Africa. .

On Friday, February 4, Moody’s Investors Service (“Moody’s”) downgraded the long-term issuer and senior unsecured debt rating of the Government of Ghana to Caa1 from B3 and changed the outlook from negative to stable. .

But the Department of Finance statement said: “According to Moody’s, the downgrade is due to ‘the increasingly difficult task facing the government in addressing the intertwined challenges of liquidity and debt, underperformance pandemic-induced revenue shortfalls, stringent financing conditions in international markets that drastically reduce governance and institutions, the strength and inflexibility of the state budget.

“[Government] believes that the recent fiscal consolidation measures announced by the Minister of Finance and the 2022 budget, which is anchored on debt sustainability and a positive primary balance, largely address these concerns. we disagree to understand Moody’s assertion of Ghana’s deteriorating institutional strength given Ghana’s reputation as a beacon of democracy in Africa.

“In a clearly contradictory way, Moody’s justifies the stable outlook despite the downgrade to Caa1 by acknowledging the government’s strong track record of putting in place effective fiscal policies and maintaining a variety of funding sources,” say parts of the statement. government statement.

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