Deloitte forecasts higher credit ratings for Ghana attributed to improved debt sustainability, marked by a 37% reduction in Eurobond components and a declining debt-to-GDP ratio. Plans for liability management and enhanced bond maturity are outlined to foster investor confidence. The government must maintain fiscal discipline and coordinate closely with the Central Bank to support economic goals.
Professional services firm Deloitte anticipates an increase in Ghana’s credit ratings due to enhanced debt sustainability. In October 2024, Moody’s upgraded Ghana’s long-term ratings for both foreign and local currencies, while Fitch similarly raised its long-term local currency issuer default rating. This was bolstered by a 37% reduction in Eurobond components as part of a comprehensive debt restructuring program by the government, which is around 93% complete, aiming to elevate credit ratings and bolster investor sentiment.
The government intends to execute liability management operations to lower risks related to the Eurobond debt and maintain adequate reserves in a sinking fund for effective public debt management. Deloitte’s analysis of the 2025 budget indicates a consistent decline in the debt-to-GDP ratio, decreasing from 78.5% in December 2021 to 61.8% in December 2024, marking a notable improvement towards the IMF’s medium-term target of 55% by 2028.
Deloitte states that the improvements in debt sustainability should engender favorable ratings from international credit agencies, enhancing investor confidence in the economy. Furthermore, government plans to extend bond maturities and stimulate the secondary market for bonds are expected to facilitate greater access to long-term debt, thus mitigating refinancing risks and smoothing cash flow management.
The strategy of leveraging the sinking fund to build cash reserves for debt repayments is viewed positively, though it demands fiscal discipline for successful implementation. Deloitte also commended the recent decline in Treasury bill rates due to the government’s rejection of auction offers above designated thresholds, signaling fiscal discipline. However, they advise close coordination between the Finance Minister and the Central Bank to ensure that governmental decisions do not inadvertently disrupt monetary policy objectives, emphasizing that improved cooperation between these entities is crucial for achieving economic goals.
In conclusion, Deloitte projects that Ghana’s credit ratings will improve due to significant advancements in debt sustainability, evidenced by a declining debt-to-GDP ratio and a proactive government restructuring program. Initiatives to manage liabilities and extend bond maturities are expected to enhance investor confidence. Nevertheless, the successful execution of these plans hinges on fiscal discipline and improved coordination between fiscal and monetary authorities, which are critical for achieving sustainable economic outcomes.
Original Source: 3news.com
