Moody’s, one of the leading global rating agencies, on Friday, upgraded the Government of Ghana’s long-term local and foreign currency issuer ratings to Caa2 from Caa3 and Ca, respectively. In a statement on Friday, Moody’s Ratings noted that the decision to upgrade to Caa2 was driven by Ghana’s extensive debt treatment that has offered meaningful relief to the government’s finances.
“Since seeking relief through the G20 common framework for debt treatment in 2022, the government of Ghana restructured local currency debt and debt owed to bilateral official-sector creditors and concluded the exchange of Eurobonds on 9 October rating,” Moody’s noted.
“Debt restructuring, along with the debt service moratorium imposed during the negotiation period, has reduced the government debt burden from a peak of 93% of GDP in 2022 to an expected 81% in 2024,” the agency added.
The agency also changed Ghana’s outlook from stable to positive. Moody’s said, “The positive outlook reflects the potential for liquidity risk to ease amid ongoing fiscal consolidation efforts.”
A vital aspect of Ghana’s fiscal outlook is the extent to which the government can maintain fiscal consolidation efforts. Moody’s noted that the risk of fiscal arrears accumulating still exists given the upcoming elections in December 2024.
However, Moody’s forecasts a balanced primary budget in 2024 and revert to a primary surplus of 1.3% of gross domestic product record in 2023.
The government of Ghana currently relies on the issuance of Treasury bills at a high rate of close to 27%, above the country’s inflation rate of 21%. Consequently, liquidity risk remains high, constraining the rating.
Moody’s noted that a further upgrade of Ghana’s ratings is likely if the government continues to deliver on fiscal consolidation. If the rating is upgraded, Ghana’s external profile will continue to strengthen, with the support of gold exports, official-sector funding, and remittance inflows.
