Deloitte forecasts improved credit ratings for Ghana due to enhanced debt sustainability, following significant debt restructuring and reductions in the debt-to-GDP ratio. Upcoming strategies, including liability management and maturity extension of bonds, aim to bolster investor confidence. Fiscal discipline remains crucial for maximizing these benefits.
Deloitte predicts that Ghana will see higher credit ratings due to enhancements in debt sustainability. Notably, in October 2024, Moody’s upgraded Ghana’s long-term ratings in both foreign and local currency. Concurrently, Fitch also elevated Ghana’s long-term local currency issuer default rating. These upgrades followed a significant 37% reduction in the principal amount of Eurobond components as part of Ghana’s comprehensive debt restructuring program.
The government anticipates that the ongoing debt restructuring, which is approximately 93% complete, will foster better credit ratings and bolster positive investor sentiment. Furthermore, there are plans for liability management operations aimed at mitigating risks tied to the Eurobond debt portfolio while ensuring adequate reserves in the sinking fund for effective public debt management.
In its analysis of the 2025 budget statement, Deloitte highlighted a consistent reduction in the debt-to-GDP ratio, which declined from 78.5% in December 2021 to 61.8% by December 2024. This decline signifies notable improvements in debt sustainability and aims to meet the medium-term target of a 55% debt-to-GDP ratio by 2028, as agreed with the International Monetary Fund (IMF).
Deloitte remarked that improvements in debt sustainability are likely to prompt better ratings from international credit rating agencies, subsequently enhancing investor confidence in Ghana’s economy. Additionally, the government’s plans to extend the bond maturity profile and enhance secondary bond market activity will provide increased access to longer-dated debt and reduce issuance costs. Such measures are projected to afford the government greater predictability in cash flow management, thereby alleviating refinancing risks.
Strategies to leverage the sinking fund to build cash reserves for debt repayment could significantly bolster the government’s debt repayment credibility and investor confidence. However, success in this area will require a high degree of fiscal discipline to achieve the set goals. Deloitte also commended the recent drop in T-bill rates due to the government’s decision to decline auction offers exceeding designated thresholds, showcasing fiscal discipline.
In conclusion, Deloitte’s analysis indicates that improved debt sustainability in Ghana, reflected in the decreasing debt-to-GDP ratio and credit rating upgrades, is likely to enhance investor confidence. Key government strategies, including liability management operations and extending bond maturities, aim to optimize public debt management. Maintaining fiscal discipline is essential for sustaining these improvements and achieving long-term economic goals. Coordinated efforts between fiscal and monetary policies will further support Ghana’s economic stability and growth.
Original Source: 3news.com
