Fitch Solutions projects Ghana’s primary income deficit to remain low at 3.1% of GDP amid ongoing debt restructuring that will reduce external obligations by $3.5 billion from 2024-2026. Although interest payments will decrease, the country faces pressures from cuts in US aid, impacting secondary income and net transfers.
According to Fitch Solutions, Ghana is expected to maintain a modest primary income deficit as a result of ongoing debt restructuring efforts. The restructuring, which involves replacing old dollar bonds with new instruments, will lower Ghana’s external debt service obligations by $3.5 billion from 2024 to 2026.
This restructuring led to a reduction in interest payments by 1.3% of GDP for 2024, 0.9% for 2025, and 0.6% in 2026, compared to previous bond terms. Furthermore, an agreement with official creditors has established a moratorium on debt servicing that lasts until May 2026.
As a result of these measures, Fitch Solutions forecasts that Ghana’s primary income deficit will be held at 3.1% of GDP, lower than its five-year average of 5.5%. However, Ghana’s current account may encounter challenges due to a significant reduction in US international aid.
Recently, the US announced a 90% decrease in USAID contracts, which accounts for roughly 20% of Ghana’s total aid receipts. This will likely have a detrimental effect on Ghana’s secondary income surplus. While there may be an increase in remittance inflows and aid from other sources, these are expected to be insufficient to counterbalance the loss in US aid.
Fitch Solutions also predicts a contraction of 3.0% in net current transfers for Ghana in 2025, indicating potential financial strain in the coming years despite debt restructuring improvements.
Fitch Solutions anticipates that Ghana’s primary income deficit will remain relatively low at 3.1% of GDP due to effective debt restructuring, reducing external obligations significantly. However, the country’s current account will likely face challenges stemming from substantial cuts in US aid, leading to a predicted decline in net current transfers. Overall, while restructuring efforts show promise, the impact of external aid reductions will need to be addressed.
Original Source: www.ghanaweb.com
