To fully meet debt amortisation obligations as well as fiscal financing requirements for 2020, Ghana is said to need approximately $11 billion to do just that.
According to credit rating firm, Fitch Ratings, the needed amount forms 16 per cent of Ghana’s Gross Domestic Product (GDP).
Ghana in the wake of the pandemic, through several means has sought to close the wide fiscal financing gap created by the pandemic.
Government in a bid to meet its fiscal financing needs, made draw downs totaling $210 million from its Petroleum Funds coupled with a Ghs 10 billion asset-purchase programme from the BoG as it was unable to enter the debt market – both international and domestic – for fears of high interest rates.
The country, in addition to the $3 billion dollar Eurobond issued in February prior to recording its first case in March, has received fiscal support in excess of $1.5 billion from multilateral creditors such as the IMF and World Bank to aid the country in meeting its fiscal financing needs.
However, Fitch is of the view that the fiscal support gained so far are inadequate to fully meet the country’s financing needs and expects Government to raise the remainder from the domestic debt markets.
Fitch Ratings last Thursday affirmed Ghana at B with a stable outlook stating that the positive rating action reflects a gradual recovery of economic performance, fiscal revenue, stabilisation of debt to GDP and the ready availability of both external and domestic financing sources after the shock sustained from the Covid-19 pandemic.
It further noted that Ghana’s liquidity and available financing sources are consistent with its ‘B’ rating.
The main factors that could individually of collectively lead to a positive rating include;
- A greater confidence in Government’s ability to drive public debt to GDP onto a downward path through fiscal consolidation strategies
- Improvement in external liquidity such as an increase in international reserves occuring through non-debt inflows
The main factors that individaully or collectively lead to a negative rating include;
- Expectations of a persistent rise in public debt trajectory for the mdedium-term
- A decline in international reserves as a result of prolonged lack of access to international capital markets
- Sustained increase in macroeconomic instability