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Fitch said on Thursday that it had downgraded Ghana's debt rating to "B" from "B+" due to concerns over its rising deficit.
Ghana's budget deficit jumped to 11.8 percent of GDP in 2011 from 4 percent, largely due to a high government wage bill and a costly presidential election.
"The authorities continued to overrun on wages, interest costs and arrears, leading Fitch to expect that the government will fail to meet the 9 percent of GDP fiscal deficit target for this year," the ratings agency said in a statement.
Fitch in February downgraded Ghana's outlook from "stable" to "negative," citing the government's announcement that the deficit to GDP ratio in 2012 had nearly doubled from its estimate for the year.
"Policy credibility has been significantly weakened, following two years of larger-than-expected budget deficits," the agency said in today's statement.
The world's second-largest producer of cocoa and Africa's second-largest producer of gold, Ghana has experienced rapid economic growth in the years since oil production started in 2010.
The country's economy grew a staggering 14 percent in 2011 and eight percent in 2012.
But revenue from oil production, at $541 million last year, was about half of what the government had originally been expecting from the sector.
Ghana's finance ministry said that Fitch's downgrade failed to reflect the country's reform efforts, notably in public financial management.
"These are being currently implemented to support fiscal consolidation," it said.
It also pointed to an issue of a Eurobond that had lower interest costs than domestic debt that it used to refinance maturing debt, as well as changes to debt management at state-owned firms.
President John Dramani Mahama was elected last year in polls that were disputed by the leading opposition party and resulted in a lengthy legal battle in the supreme court that ended with the win being upheld.
Fitch applauded Ghana's peaceful handling of the elections and said the government's decision this year to raise electricity tariffs and cut fuel subsidies would help stabilise the deficit.
Fitch said it expects Ghana's GDP to continue to grow at an average of 6 to 7 percent in the medium term. It also predicted that oil production would reach 200,000 barrels per-day by 2017.