Bangkok--3 Jun--Standard & Poor's Standard & Poor's Ratings Services today said it had affirmed its 'B+' long-term and 'B' short-term sovereign credit ratings on the Republic of Ghana. The outlook is stable. "The affirmation reflects accumulating evidence that Ghana will benefit substantially from offshore oil production from the end of this decade, offsetting the ongoing weakness in its fiscal and external performance by 2011 at the latest," Standard & Poor's credit analyst Remy Salters said. "At the same time, however, Ghana's oil finds increase the importance of strong fiscal governance and monetary management to rating prospects." Fiscal performance deteriorated very markedly in 2006, with a general government deficit (including grants) of 6% of GDP, from 1% in 2005. The deficit increased further to 8% in 2007, and we forecast 7% in 2008. This has primarily been due to the need for emergency measures to remove energy constraints on growth and related large investments, but recurrent spending has also seen overruns. As a result, Ghana's debt has again begun to rise following substantial forgiveness, taking public sector debt to 52% of GDP in 2007 from 42% in 2006. Although a $750 million bond was issued in September 2007, deficit financing remains dependent on concessional borrowing, giving importance to continued good relations with donors. The energy import bill rose to 26% of total imports in 2007 from 18% in 2004, weighing heavily on the current account. We project the current account deficit at 17% of GDP in 2008, up from 15% last year due to continued energy import pressures, as well as imports related to oil exploration. Offshore oil reserves cannot yet be firmly estimated, but exploration results point to a large boost to fiscal revenues from 2010 even if world prices soften in the interim. Production also appears certain to exceed domestic consumption by a wide margin, which would lead to a dramatic improvement in external performance. Nevertheless, the significant endowment also increases the risk that the government will dilute painful measures, such as power pricing reforms and efforts aimed at containing recurrent spending, until the advent of oil revenues. "The stable outlook is predicated on continued political stability and the prospect of nationally significant oil wealth," Mr. Salters said. "Any indication that the greater fiscal flexibility afforded by debt forgiveness was being misdirected rather than invested productively would undermine prospects for the ratings, as would increases in the twin deficits beyond current expectations." The ratings could also come under pressure if Ghana embarked on policies that endangered relations with donors or if government oil-related revenues looked unlikely to materialize. Conversely, reforms that tangibly bolster fiscal sustainability and governance could underpin rating improvements in the medium term. Ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. It can also be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Credit Ratings Search. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office Hotline (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4017. Members of the media may also contact the European Press Office via e-mail on: [email protected]. Media Contact: David Wargin, New York (212) 438-1579 [email protected] Analyst Contacts: Remy Salters, London (44) 20-7176-7113 Moritz Kraemer, Frankfurt (49) 69-33-99-9249