Deloitte forecasts that Ghana’s credit ratings will rise due to better debt sustainability, attributed to significant reductions in the debt-to-GDP ratio and successful debt restructuring. The government plans to improve cash flow management and investor confidence through various measures, including liability management and extending bond maturity profiles.
Deloitte has projected that Ghana will experience higher credit ratings due to enhanced debt sustainability. In October 2024, Moody’s upgraded Ghana’s long-term ratings for both foreign and local currencies, followed by a similar upgrade from Fitch for its long-term local currency issuer default rating. These improvements were a result of a 37% reduction in the Eurobond principal as part of the government’s comprehensive debt restructuring program.
The government anticipates that the ongoing debt restructuring, currently at 93% completion, will bolster credit ratings and investor sentiment. Furthermore, it plans to implement liability management operations to alleviate risks related to the Eurobond debt portfolio and ensure adequate reserves in the sinking fund for effective public debt management.
Deloitte’s analysis of the 2025 budget reveals a significant decline in the debt-to-GDP ratio, which has fallen from 78.5% in December 2021 to 61.8% by December 2024. This demonstrates notable progress toward the International Monetary Fund’s medium-term target debt-to-GDP ratio of 55% by 2028. Deloitte emphasized that this improvement would likely lead to better ratings from international credit agencies, thus enhancing investor confidence in Ghana’s economy.
Additionally, the government’s strategy to extend the maturity profile of its bonds and stimulate activity within the secondary bonds market is expected to provide increased access to long-term debt and minimize issuance costs. This approach aims to improve cash flow management, optimize the redemption profile, and reduce refinancing risks associated with the existing debt portfolio.
Deloitte highlighted the importance of leveraging the sinking fund to build cash buffers for debt repayment, which is expected to enhance the government’s repayment credibility and foster investor confidence. However, achieving this objective will necessitate a substantial commitment to fiscal discipline by the government.
Lastly, Deloitte commended the recent decline in T-bill rates, attributed to the government’s decision to reject auction offers for T-bills exceeding specified thresholds. They recommended that the Finance Minister collaborate closely with the Central Bank to further advance the government’s fiscal objectives while maintaining the integrity of monetary policy. Enhanced coordination between monetary and fiscal policy authorities is viewed as essential for achieving economic goals.
In summary, Deloitte’s analysis indicates that Ghana’s improved debt sustainability is expected to enhance its credit ratings, thereby boosting investor confidence. The government’s debt restructuring efforts, effective management of Eurobond risks, and strategic financial planning are all pivotal in achieving these outcomes. Continuous collaboration between fiscal and monetary policy authorities will be vital for the country’s economic progress.
Original Source: 3news.com
