Ghana: Fitch to upgrade sovereign debt credit rating if missed bond payments are settled
Fitch, the global credit rating agency, has stated that it may upgrade Ghana’s Long-Term Local-Currency Issuer Default Rating (LTLC) if the country successfully clears all outstanding payments of its bonds and proves its capacity and willingness to honor its local currency debt. The UK-based firm has recently downgraded the country’s sovereign debt to Restrictive Default, but an upgrade may be in the offing if Ghana satisfies the necessary criteria.
Fitch’s decision will be based on a forward-looking analysis of Ghana’s ability to pay its local currency debt, along with its willingness to do so. If Ghana reaches an agreement with its private creditors regarding the restructuring of its foreign-currency-denominated debt and completes the restructuring process following the Common Framework official creditors’ claims treatment, Fitch has stated that it will assign a positive rating.
Ghana has scored a 5 for Creditor Rights, indicating its willingness to service and repay debt, a key rating driver with a high weight, and an ESG Relevance Score (RS) of ‘5’ for Creditor Rights. According to Fitch, this indicates that the willingness to repay debt is highly relevant to the rating, and the highest relevant score is 3.
Furthermore, Fitch has given Ghana an Environment, Science and Governance Score (RS) of ‘5’ for Political Stability and Rights, the Rule of Law, Institutional and Regulatory Quality, Control of Corruption, and Creditor Rights. This score reflects the significant importance that the World Bank Governance Indicators (WBGI) have in Fitch’s proprietary Sovereign Rating Model.
Ghana has a moderate WBGI ranking of 50.8, indicating a recent track record of peaceful political transitions, moderate institutional capacity, established rule of law, and a moderate level of corruption. The country’s overall score for Environmental, Social, and Governance (ESG) factors is, therefore, positive.
Fitch’s decision to downgrade Ghana’s sovereign debt to Restrictive Default came after the country defaulted on its Eurobond payment in 2020. However, the rating agency’s statement implies that there is potential for an upgrade in the future, subject to Ghana’s ability to clear its outstanding payments and exhibit a commitment to honoring its local currency debt.
Fitch’s assessment of Ghana’s LTLC IDR rating, which currently reflects the agency’s view that the country is in default, is subject to change. If Ghana manages to clear its outstanding payments and demonstrates its capacity and willingness to honor its local currency debt, it could lead to a positive rating in the future.
