Deloitte forecasts higher credit ratings for Ghana driven by enhanced debt sustainability, indicated by recent upgrades from Moody’s and Fitch. The government’s debt restructuring, which has resulted in a significant reduction of Eurobond liabilities, is nearing completion and is expected to bolster investor confidence. A declining debt-to-GDP ratio supports this positive trend, with strategic financial management seen as essential for future improvements.
Deloitte anticipates improved credit ratings for Ghana due to better debt sustainability. Moody’s upgraded Ghana’s long-term foreign and local currency ratings in October 2024, followed by Fitch’s upgrade for the long-term local currency issuer default rating. These updates come after a 37% reduction in Eurobond components from the government’s debt restructuring program, which is approximately 93% complete.
The Ghanaian government expects that this restructuring will enhance credit ratings and positively influence investor sentiment. Additionally, strategies to manage Eurobond debt risks, including maintaining adequate reserves in the sinking fund, will enable effective public debt management.
Deloitte noted in their analysis of the 2025 budget that a steady decline in the debt-to-GDP ratio—down from 78.5% in December 2021 to 61.8% in December 2024—signifies significant improvement in debt sustainability, aiming for a target of 55% by 2028 as per the International Monetary Fund (IMF) agreement.
According to Deloitte, enhanced debt sustainability is likely to lead to better ratings from international credit agencies, fostering increased investor confidence. Plans for extending bond maturities and enhancing the secondary bond market activity are expected to improve the government’s access to longer-term debt, relieving cash flow pressures and reducing refinancing risks.
Moreover, utilizing the sinking fund to establish cash buffers for debt repayment is expected to enhance the government’s repayment credibility and bolster investor confidence. Effective execution of these strategies will require substantial fiscal discipline to succeed.
Lastly, the reduction in T-bill rates, attributed to the government’s decision to decline auction offers exceeding set thresholds, reflects fiscal discipline. Deloitte commended this approach, urging the Finance Minister to collaborate closely with the Central Bank to align fiscal and monetary policies effectively, enhancing the achievement of economic objectives.
Deloitte projects higher credit ratings for Ghana due to improved debt sustainability from ongoing restructuring efforts. The steady decline in the debt-to-GDP ratio promises enhanced investor confidence. Strategic approaches to bond management and fiscal discipline will be crucial in achieving these goals, ultimately benefiting Ghana’s economic outlook.
Original Source: 3news.com
