Moody’s upgrades Ghana’s rating, signals positive outlook

Global credit ratings agency Moody’s has upgraded Ghana’s long-term local and foreign currency issuer ratings to one notch higher to “Caa2” from “Caa3” and “Ca,” respectively, signaling a significant step in the country’s economic recovery.
The upgrade is attributed to extensive debt restructuring, which has eased the government’s financial burdens.
Moody’s also revised Ghana’s outlook from “stable” to “positive,” reflecting improved prospects for economic stability.

Debt restructuring eases financial strain
Moody’s highlighted Ghana’s successful restructuring of its debt obligations, including a moratorium on debt servicing, as a key factor in the ratings upgrade.
This restructuring has reduced liquidity pressures and allowed the government to focus on stabilizing its finances.
“The extensive debt treatment has significantly alleviated the government’s financial burdens,” Moody’s noted in its statement.
The agency also praised Ghana’s ongoing fiscal consolidation measures, supported by the International Monetary Fund (IMF) programme, which have further contributed to the country’s improving economic situation.
These efforts are expected to reduce liquidity risks and enhance fiscal stability.

Positive outlook encourages investor confidence
The shift to a “positive” outlook signals the potential for further improvements in Ghana’s economic prospects, particularly as the country continues to implement IMF-backed reforms.
Moody’s stated that this outlook reflects the possibility of reduced liquidity risk as the government moves forward with its budgetary adjustments.
The ratings upgrade is likely to boost investor confidence in Ghana, paving the way for stronger growth in the coming years. With the restructuring of its debt and the implementation of sound fiscal policies, Ghana is positioning itself to recover from the economic challenges it faced in recent years.

Debt-to-GDP ratio set to decline
Moody’s projections show that Ghana’s debt-to-GDP ratio is expected to decline to 81% by the end of 2024, down from 93% in 2022.
This reduction in debt levels is crucial for restoring investor confidence and stabilizing the country’s economy.
The agency also anticipates continued, albeit gradual, debt reduction as Ghana resumes paying interest and principal on its debts.

IMF Programme and Debt Overhaul Progress
Last week, Ghana reached an agreement with the IMF on the third review of its $3 billion loan programme.
The country’s recent debt overhaul, approved by more than 90% of bondholders, is expected to reduce its debt stock by $4.7 billion and provide $4.4 billion in cash flow relief during the IMF programme, which runs until 2026.
Ghana’s progress in restructuring its $30 billion debt, coupled with support from international lenders, has been a cornerstone of its economic recovery efforts.
The government remains committed to fiscal consolidation and economic reforms aimed at fostering long-term growth.

Economic growth and currency challenges
In a positive development, Ghana’s economy grew by 6.9% in the second quarter of 2024, the fastest growth rate in five years, according to the country’s statistics agency.
However, challenges remain, particularly with the depreciation of the local currency, the cedi, which has lost nearly 25% of its value against the dollar this year.
Despite these difficulties, Moody’s expects Ghana’s economic recovery to continue, driven by sustained efforts to reduce debt, stabilize the currency, and promote fiscal discipline.

Path to economic stability
Ghana’s recent ratings upgrade and positive economic outlook underscore the country’s resilience in the face of economic challenges. With the support of the IMF and the successful restructuring of its debt,
Ghana is making significant strides toward economic recovery. As the country continues to implement its fiscal reforms, the prospects for long-term stability and growth are becoming increasingly promising.