Deloitte Projects Heightened Credit Ratings for Ghana Due to Enhanced Debt Sustainability
Deloitte projects improved credit ratings for Ghana following debt sustainability improvements. Moody’s and Fitch recently upgraded Ghana’s ratings due to significant debt restructuring. The government’s efforts to manage public debt and extend bond maturities are expected to bolster investor confidence and fiscal stability.
Deloitte has projected that Ghana’s credit ratings will improve due to enhanced debt sustainability. Recently, Moody’s upgraded Ghana’s long-term ratings for both foreign and local currency, while Fitch also improved the country’s long-term local currency issuer default rating. These upgrades come in light of a 37% reduction in Eurobond principal amounts resulting from the government’s comprehensive debt restructuring, which is approximately 93% complete.
The government anticipates that concluding the restructuring will lead to higher credit ratings and improved investor sentiment. To further mitigate risks associated with Eurobond debt, plans for liability management operations have been proposed, as well as the establishment of sufficient sinking fund reserves to manage public debt effectively.
Deloitte’s analysis of the 2025 budget reveals a consistent decline in Ghana’s debt-to-GDP ratio, which has decreased from 78.5% in December 2021 to 61.8% as of December 2024. This represents substantial progress towards the targeted debt-to-GDP ratio of 55% by 2028, as agreed upon with the International Monetary Fund (IMF). According to Deloitte, “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 bonds market activity are predicted to provide greater access to long-term debt and reduce issuance costs. This approach is expected to facilitate better cash flow management and mitigate refinancing or rollover risks associated with government debt.
Deloitte emphasized the importance of building cash buffers through the sinking fund for debt repayment, stating that it would enhance the government’s credibility in debt repayment and boost investor confidence. However, achieving this requires significant fiscal discipline. Additionally, Deloitte commended the recent decrease in T-bill rates, attributed to the government’s cautious approach in rejecting auction offers exceeding specified thresholds, while advising closer collaboration between the Finance Minister and the Central Bank for better alignment of fiscal policies.
In summary, Deloitte’s projections indicate that Ghana is on a positive trajectory towards enhanced credit ratings due to improved debt sustainability. The successful implementation of debt restructuring, reduction in the debt-to-GDP ratio, and planned financial operations are collectively contributing to greater investor confidence and a healthier economic outlook for Ghana.
Original Source: 3news.com
