Fitch Ratings Affirms Ghana’s Long-Term Local Currency Issuer Default Rating at ‘CCC’
Fitch Ratings has affirmed Ghana’s Long-Term Local-Currency (LTLC) Issuer Default Rating (IDR) at ‘CCC’.
The Long-Term Local-Currency (LTLC) Issuer Default refers to cedi-denominated bonds.
According to Fitch Ratings, the credit rating affirmation of the country’s Long-Term Local-Currency (LTLC) Issuer Default Rating (IDR) at ‘CCC’ reflects that Ghana has remained current on the ‘new’ bond payments issued on the settlement date of the domestic debt exchange programme and on LC securities issued since November 2023.
The credit rating agency in its rating commentary noted that it considers an additional restructuring of Ghana’s Local Currency-denominated debt as unlikely, given the sizeable debt service reduction the programme represented.
However, the affirmation also still reflects substantial credit risk partly due to elevated interest payments on local currency debts held by the Government.
Ghana in December 2022 launched the domestic debt exchange in a bid to deal with its spiralling debt payments defaulting on both its local and external debt service payments.
The Government, since then, has managed to successfully restructure some GHS 208bn local debt through the domestic debt exchange programme in a bid to bring the country’s public debt down to more manageable levels from the then-estimated 105% of GDP to 55% by 2028.
Commenting on the country’s large fiscal consolidation measures, Fitch ratings stated, “We estimate the 2024 primary surplus, on a commitment basis, will reach 0.3% of GDP, representing a 4.6 percentage points (pp) adjustment compared with 2022, driven by a 0.6pp increase in revenue and a 4.1pp reduction in primary expenditure.”
“Despite a record of fiscal slippage in election years, we consider there is a low risk of policy slippage in the lead up to the elections due in December 2024, given the strong commitment of authorities to the IMF programme, but there is currently greater uncertainty over the degree of commitment of a new administration. We project Ghana’s primary surplus to reach 0.9% of GDP in 2026 on a commitment basis,” the agency added.
