Deloitte Projects Enhanced Credit Ratings for Ghana Amid Improved Debt Sustainability

Deloitte anticipates higher credit ratings for Ghana as a result of improved debt sustainability. Following recent upgrades by Moody’s and Fitch, the government’s restructuring initiatives, which include a significant reduction in Eurobond debt, are projected to enhance investor confidence. Furthermore, the government’s strategies aim to manage debt effectively while fostering fiscal discipline.

Deloitte has projected an increase in credit ratings for Ghana due to enhanced debt sustainability. This forecast follows Moody’s upgrade of Ghana’s long-term ratings for both foreign and local currency in October 2024, as well as Fitch’s upgrade of the long-term local currency issuer default rating. These positive changes are attributed to a 37% reduction in the principal amount of Eurobond components as part of the government’s comprehensive debt restructuring program.

Currently, the government is near completion of this restructuring process, which stands at approximately 93% complete. It is anticipated that the successful finalization of this restructuring will enhance credit ratings and foster a more positive sentiment among investors. Additionally, the government plans to undertake liability management operations aimed at reducing risks associated with Eurobond debt and maintaining adequate reserves in the sinking fund for effective public debt management.

According to Deloitte’s analysis of the 2025 budget statement, there has been a considerable decline in the debt-to-GDP ratio, which has decreased from 78.5% in December 2021 to 61.8% in December 2024. This substantial improvement signifies enhanced debt sustainability and marks significant progress towards reaching the medium-term target debt-to-GDP ratio of 55% by 2028, as established in agreement with the International Monetary Fund (IMF).

Deloitte indicated, “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.” Furthermore, the government’s plans to extend the maturity profile of its bonds and enhance secondary market activity are likely to afford greater access to long-term debt and reduce issuance costs, effectively providing some relief to government cash flow management.

The establishment of a sinking fund to accumulate cash reserves for debt repayment is expected to bolster the government’s credibility in meeting its debt obligations and enhance investor confidence. This strategy for prudent debt management necessitates a significant commitment to fiscal discipline to achieve its intended outcomes. Deloitte also commended the recent decrease in Treasury bill rates, resulting from the government’s decision to reject auction offers exceeding specified thresholds, noting the importance of such fiscal discipline.

Additionally, Deloitte advised close collaboration between the Finance Minister and the Central Bank to ensure alignment on fiscal objectives, cautioning that even well-intentioned government actions could negatively affect monetary policy. They asserted that improved coordination between monetary and fiscal authorities is vital for successfully achieving economic goals.

Deloitte’s analysis highlights the positive trajectory of Ghana’s credit ratings, driven by substantial improvements in debt sustainability. With successful restructuring and effective fiscal strategies, investor confidence is expected to rise. As the government navigates its financial challenges, the emphasis on fiscal discipline and coordinated policy efforts is essential for achieving economic stability and growth.

Original Source: 3news.com