Higher upgrades can be achieved through fiscal discipline - Economist

An economist, Professor Lord Mensah, has stated that Ghana’s credit rating could see further upgrades if fiscal discipline is prioritized and goes through a successful debt restructuring with its external creditors.

International rating agency, Fitch, upgraded Ghana’s Long-Term Local-Currency Issuer Default Rating from RD to CCC.

The issue ratings on local-currency bonds issued domestically that have not matured yet have also been upgraded to 'CCC' from 'D'.

Prof. Lord Mensah noted that “If the government will listen and try as much as possible to reduce expenditure, that will improve, probably, the rate we find ourselves in. We can even do better.

“So, there is always room for improvement. Let’s see what comes out in the coming weeks when we get our external debts restructured and then get the IMF programme which could improve the ratings further,” he was quoted by citinewsroom.com.

The upgrade of the ratings on Ghana's LC-denominated debt follows the completion, effective 21 February 2023, of the domestic debt exchange programme by the Republic of Ghana. Fitch viewed this transaction as a distressed debt exchange in a context of heightened fiscal pressures, with interest costs amounting to 54% of revenues in 1H22, and a lack of access to international capital markets.

Fitch noted that Ghana’s ability to secure an IMF bailout may be dependent on a number of factors including the country’s ability to achieve a debt-to-GDP ratio of 55%.

It added that the government’s ability to get financial assurances from external creditors.

A statement by Fitch said: “IMF support for Ghana will likely depend on the government's ability to show a path towards bringing the present value of debt to 55% of GDP over the forecast horizon on the basis of the IMF/World Bank debt sustainability analysis and the ability of official bilateral creditors to provide financing assurances in the context of the Common Framework external debt restructuring that authorities have requested.”



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