The ratings agency also cited doubts about whether the government can reduce it quickly enough.

The decision to lower the rating to “B-” with a stable outlook from “B” with a negative outlook appears to contradict government comments about the impact of a possible deal with the International Monetary Fund to stabilise the economy.

(READ MORE: Ghana says close to deal with IMF on financial assistance programme)

Finance Minister Seth Terkper told Reuters the decision was a surprise and does not reflect government progress in stabilizing the macro economy or prospects for the IMF deal.

Ghana’s economy has grown rapidly in recent years through exports of gold, cocoa and oil but the 2014 forecast is weighed down by fiscal problems such as rising inflation, a currency that has fallen sharply and a budget deficit above 10 percent.

News in August of the IMF talks helped stabilise the currency which has rebounded slightly after losses of around 40 percent this year. The government also secured an attractive rate for its one billion US dollars Eurobond and sealed a record cocoa loan.

These factors, combined with a deal with the Fund that the government hopes to strike in November, enabled government officials to reassure markets and voters about the economy. S&P, however, expressed doubts.

“There has been a recent slight respite due to the issuance of the Eurobond, but fundamentally there is not a clear path out of this high fiscal deficit situation,” S&P director Ravi Bhati said.

The ratings agency has concerns over the possible IMF deal given that the Fund is likely to want a faster pace of fiscal consolidation than the government is able to deliver, Bhati said.  

Finance minister Terkper said the government was reaching convergence with the IMF on a deal but had anyway pursued its own fiscal reforms. It had struck a good bargain with labour unions, cleared one time wage arrear costs and refinanced bonds.

Government revenue was hurt by a fall in gold and cocoa prices and a shortfall in gas supplies, he said.

But revenue would increase as domestic oil production picked up steam and gas started pumping from the offshore Jubilee field, so medium term prospects are strong, he said.

“We are positive of regaining our ratings because the country will grow back to a positive growth path,” Terkper said.

Ghana saw years of GDP growth above 8 percent but the statistical service projected GDP for 2014 at 6.9 per cent. S&P put annual GDP growth in the 2014-2017 period at six percent, but even that figure is still above the Fund’s projection of 5.1 per cent GDP for economies in sub-Saharan African this year.

(READ MORE: Ghana’s fiscal problems threaten economic growth: IMF)

The S&P downgrade follows similar moves by Moody’s and Fitch in the last year. It divided opinion among analysts.

The apparent recent upturn in economic fortunes is undercut by the government’s unwillingness to reduce expenditure and the deficit and this explains the S&P decision, said Joe Jackson, director of business operations at Dalex Finance in Accra.

Sampson Akligoh, managing director of InvestCorp investment bank, said the downgrade “is more speculative than otherwise” given that markets were waiting to assess government commitment to consolidation and how far an IMF deal could restore credibility.