Deloitte anticipates higher credit ratings for Ghana due to improved debt sustainability and successful debt restructuring, which includes a significant reduction in Eurobond components. The government’s strategies aim to bolster investor confidence and meet fiscal targets, necessitating strong fiscal discipline and coordination with monetary policies.
Deloitte has indicated that Ghana’s credit ratings are expected to rise due to improvements in debt sustainability. In October 2024, Moody’s upgraded both the foreign and local currency ratings for Ghana, and Fitch likewise raised the local currency issuer default rating. This positive change comes after a 37% reduction in the Eurobond components as part of the government’s comprehensive debt restructuring, which is nearing completion at approximately 93%.
The completion of this restructuring is anticipated to enhance credit ratings and foster favorable investor sentiment. Furthermore, the government intends to undertake liability management operations to mitigate European bond debt risks while maintaining sufficient reserves in the sinking fund to manage public debt effectively.
Deloitte’s analysis of the 2025 budget statement reveals a significant improvement in the debt to GDP ratio, which decreased from 78.5% in December 2021 to 61.8% in December 2024. This reflects progress toward the medium-term debt to GDP ratio target of 55% by 2028, as prescribed by the International Monetary Fund (IMF).
Deloitte stated, “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.” The government is also focusing on extending bond maturity profiles and enhancing the secondary bond market activity to facilitate access to long-term debt and reduce issuance costs, thereby improving cash flow management.
Additionally, Deloitte highlighted that plans to utilize the sinking fund for developing cash buffers for debt repayments would bolster the government’s credibility in meeting its debt obligations and enhance investor confidence. However, such strategies require a high level of fiscal discipline to ensure success. Governance of fiscal policies must also align closely with monetary policy to avoid adverse impacts on economic objectives.
Deloitte remarked, “We however advise the Finance Minister to work closely and in a coordinated manner with the Central Bank in the bid to advance government’s fiscal objectives as certain government decisions, regardless of how well intended they may be, can have adverse impact on our monetary policy objectives.” Such coordination between the monetary and fiscal authorities is vital for achieving Ghana’s economic goals effectively.
In conclusion, Deloitte’s projections for Ghana’s credit ratings reflect a significant improvement in the nation’s debt sustainability due to successful debt restructuring efforts. The plans to improve bond maturity profiles and the effective management of public debt are crucial in fostering investor confidence. However, successful implementation will require strong fiscal discipline and close cooperation with monetary authorities to fulfill economic objectives.
Original Source: 3news.com
