Ghana’s economic fortunes remain in a precarious balance as it seeks to secure International Monetary Fund (IMF) support. Fitch Ratings, the international ratings agency, has revealed that IMF support for the country will likely hinge on the government’s ability to demonstrate a clear path towards reducing its present value of debt to 55% of Gross Domestic Product (GDP). However, Fitch has warned that the provision of financing assurances, which would enable the IMF Board approval of the ECF arrangement and the publication of a new debt sustainability analysis, may not occur until the end of Q2 2023.
The outlook for Ghana’s local currency debt market appears to be showing some signs of increased confidence following the completion of the domestic debt restructuring. Yields on 91-day T-bills reached 18.5% in March 2023, up from 35.7% in February 2023. Despite this, Fitch remains concerned that yields on T-bill auctions are likely to remain elevated as inflation continues to hover above 50% year-on-year. Moreover, Fitch does not expect a resumption of Treasury bonds auctions in the near term.
Fitch concludes that Ghana’s lack of access to international capital markets will continue to weigh on reserves, although less so than in 2022. This, in turn, is likely to impact the country’s current account deficit, which Fitch forecasts at 2.8% of GDP in 2023, down from 4.1% in 2022. However, it remains to be seen whether Ghana’s economic reforms and debt reduction efforts will be enough to convince the IMF to provide the necessary financing assurances to enable the ECF arrangement to be approved.
Ghana’s government has requested assistance from the Common Framework external debt restructuring, and a successful outcome would be a welcome boost to the country’s economic prospects. However, given the ongoing uncertainty surrounding the country’s ability to reduce its debt levels and the timeline for the provision of financing assurances, the outlook remains mixed. Only time will tell whether Ghana can successfully navigate these challenges and secure the IMF support it so desperately needs.
