Global credit ratings agency Moody’s on Friday upgraded Ghana’s long-term local and foreign currency issuer ratings to “Caa2” from “Caa3” and “Ca,” respectively.
It cited extensive debt treatment that has significantly alleviated the government’s financial burdens.
The agency also revised Ghana’s outlook to “positive” from “stable.”
Moody’s justified its decision by noting the “extensive treatment” of the country’s financial situation, particularly following the restructuring of its debt obligations.
This restructuring includes a moratorium on debt servicing agreed upon with creditors, which has been vital in easing pressure on public finances.
According to the agency, “the positive outlook reflects the potential for reduced liquidity risk” due to budget consolidation measures implemented under a programme supported by the International Monetary Fund (IMF).
The “positive outlook reflects the potential for liquidity risk to ease amid ongoing fiscal consolidation efforts supported by an IMF programme,” Moody’s said in a statement.
In this context, Moody’s decision may encourage investors to regain confidence in the Ghanaian economy, paving the way for stronger growth prospects in the future.
Ghana appears to be on the right track to overcome its economic challenges, but vigilance is essential in light of the political and economic instability that could still impact the country.
The agency also expects Ghana’s debt-to-GDP ratio to continue to decline, projecting it will reach 81% by the end of the year, down from 93% in 2022.
This reduction is crucial for restoring investor confidence and stabilizing the Ghanaian economy.
Last week, the International Monetary Fund staff and officials in Ghana reached an agreement on their third review of the country’s $3 billion loan programme.
In October, more than 90% of Ghana’s bondholders approved a $13 billion debt overhaul, paving the way for the gold and cocoa producer to emerge from its near $30 billion debt default in 2022.
Ghana’s debt restructuring is expected to reduce its debt stock by $4.7 billion and provide cash flow relief worth a total of $4.4 billion during the period of the IMF programme, which expires in 2026, the government said in June.
The country’s statistics agency said in September that Ghana’s economy grew by 6.9% in the second quarter of 2024, the fastest in five years.
The local currency, the cedi, has faced significant depreciation, losing nearly 25% of its value against the dollar this year. Moody’s also said it expects the country’s debt to keep decreasing, though at a slow pace, as the government resumes paying interest and principal on all its debts.
