Deloitte forecasts improved credit ratings for Ghana due to enhanced debt sustainability, highlighted by reductions in debt-to-GDP ratios and strategic debt restructuring initiatives. Recent upgrades from Moody’s and Fitch, alongside government fiscal discipline, are expected to boost investor confidence and support future economic growth.
Deloitte’s projections indicate that Ghana will experience higher credit ratings due to enhanced debt sustainability. In October 2024, Moody’s upgraded Ghana’s long-term ratings for both foreign and local currency, while Fitch also increased Ghana’s long-term local currency issuer default rating. This positive shift follows a significant 37% reduction in the Eurobond components as a result of the government’s debt restructuring initiative, which is approximately 93% complete.
The Ghanaian government anticipates that the successful completion of this debt restructuring will lead to improved credit ratings and more favorable investor sentiment. Additionally, the government is planning to conduct liability management operations aimed at alleviating risks related to the Eurobond debt portfolio, and to maintain adequate reserves in the sinking fund for effective public debt management.
Deloitte’s analysis of the 2025 budget highlights a consistent decline in the debt-to-GDP ratio, which has decreased from 78.5% in December 2021 to 61.8% in December 2024. This trend reflects substantial improvements in debt sustainability and significant strides towards achieving the medium-term target of 55% by 2028, as established in collaboration with the International Monetary Fund (IMF).
According to Deloitte, “The improvement in debt sustainability is expected to induce improved ratings from the international credit rating agencies, which, in turn, will drive up investor confidence in our economy.”
Moreover, the government’s intention to extend the maturity profile of its bonds and enhance the secondary bond market activity will provide greater access to long-term debt and reduce the issuance costs. This strategy is projected to enhance cash flow management for the government and help mitigate refinancing risks associated with its debt portfolio.
Furthermore, Deloitte remarked that “Plans to leverage the sinking fund, to build cash buffers for debt repayment purposes, is expected to increase government’s debt repayment credibility and boost investor confidence.” However, this approach necessitates significant fiscal discipline.
Deloitte commended the recent decline in T-bill rates, a result of the government rejecting auction offers exceeding designated thresholds, which signifies fiscal discipline. Nevertheless, they recommend that the Finance Minister collaborate closely with the Central Bank to ensure that government policies do not negatively impact monetary objectives. Effective coordination between monetary and fiscal authorities is essential for achieving desired economic outcomes.
In summary, Deloitte anticipates that heightened credit ratings for Ghana will stem from improved debt sustainability achieved through strategic debt restructuring, a declining debt-to-GDP ratio, and effective government fiscal policies. The commitment to building cash buffers and maintaining fiscal discipline enhances the government’s repayment credibility, potentially fostering increased investor confidence. Ensuring coordinated efforts between fiscal and monetary policies will be crucial for realizing Ghana’s economic goals.
Original Source: 3news.com
