Global ratings agency, Fitch announced on Wednesday, November 1 the upgrading of Ghana’s long-term local-currency issuer default rating to ‘CCC’ from ‘restricted default.’
This positive change in rating comes after Ghana successfully initiated payments on its outstanding local bonds as part of a domestic debt restructuring effort.
Ghana had grappled with financial challenges, leading to its default on most of its $29 billion external debt last year. This decision was prompted by soaring interest payments and inflation rates. The country is still in negotiations with its private international bondholders and bilateral creditors to find a resolution to this financial crisis.
One noteworthy achievement in Ghana’s recent financial journey has been the successful restructuring of its domestic debt. This action is expected to reduce the country’s interest payments by approximately 10% of the government’s projected revenues in 2023, equivalent to 1.6% of the GDP. Furthermore, in 2024, the reduction is estimated to be around 6% of revenues or 0.9% of the GDP, as reported by Fitch.
However, despite these immediate relief measures, the debt-to-GDP ratio in Ghana has increased by 0.6 percentage points, and it still remains above 100% after the restructuring process, according to Fitch.
Ghana’s domestic bond exchange program under the debt restructuring plan saw approximately 65% of eligible holders of Ghana’s 126.97 billion cedis ($10.5 billion) local bonds participating, signifying a significant response from the bondholders.
In a related development, Fitch noted that it did not anticipate Ghana to receive “financing assurances” from its external bilateral creditors before the end of June. These assurances are crucial for Ghana to secure access to a $3 billion International Monetary Fund (IMF) loan. The President of Ghana had earlier expressed his expectations of the IMF board approving the loan by the end of the month.
Ghana has also committed to restructuring its bilateral debts under the G20’s Common Framework process. The country has substantial debts amounting to approximately $13 billion with international bondholders and bilateral debts with members of the Paris Club of creditor nations and China, totaling $1.9 billion.