Moody’s Upgrades Ghana’s Rating To Positive

Dr. Mohmmed Amin Adam

 

US-based credit rating agency, Moody’s, has upgraded Ghana’s economic outlook from ‘stable’ to ‘positive’.

In a statement, it alluded that the “positive outlook reflects the potential for liquidity risk to ease amid ongoing fiscal consolidation efforts supported by the International Monetary Fund (IMF).

The credit rating agency also revised the country’s long-term local and foreign currency issuer ratings to ‘Caa2’ from ‘Caa3’ and ‘Ca’, respectively.

The new rating follows the country’s extensive debt treatment led by the Ministry of Finance that has significantly alleviated the government’s financial burdens.

Over 90% of Ghana’s bondholders approved a $13 billion debt overhaul, paving the way to emerge from its near $30 billion debt default in 2022.

Last week, the IMF staff and Ghana reached an agreement on their third review of the country’s $3 billion Economic Facility Credit (ECF) programme.

Ghana is set to receive the fourth tranche of the IMF loan programme, worth $360 million, following a staff-level agreement.

This tranche, if approved, will bring Ghana’s total disbursements to US$1.96 billion dollars.

The IMF’s support is aimed at restoring macroeconomic stability and reducing debt vulnerabilities in the country.

Moody’s in July 2024 indicated to upgrade Ghana’s credit rating following the country’s Eurobond exchange.

The New York-based firm in a statement pointed out that it has completed a periodic review of Ghana’s ratings, including its long-term issuer ratings of Caa3 for local currency and Ca for foreign currency.

These ratings, it said, reflect the government’s ongoing debt restructuring under the G20 common framework initiated in December 2022.

It further said that the restructuring of local currency debt, excluding Treasury Bills, was completed in 2023.

“The restructuring of foreign currency debt, which constitutes nearly half of Ghana’s total debt, has progressed significantly following announcements in June 2024 regarding a Memorandum of Understanding on official sector debt and an agreement in principle with bondholders,” it said.

Ghana has made notable progress in adjusting its fiscal position, with a primary fiscal balance improvement of over 4% of GDP last year.

The Finance Ministry has said the government is committed to further advancing fiscal consolidation.

Finance Minister, Dr. Mohammed Amin Adam, speaking during a press briefing to announce the Eurobond debt exchange last week, said the development cures Ghana’s default on international bonds, paving the way for normalised financial relationships with rating agencies and international markets.

“In essence, Ghana has now restructured over 90% of its eligible external debt, marking a significant milestone in its economic recovery,” he said, adding “this swift action showcases the government’s unwavering commitment to restoring financial and debt sustainability.”

 

Key Benefits

Dr. Amin Adam said the agreement with bondholders has brought significant relief, including a 37% reduction in the nominal value of Ghana’s debt, equivalent to a US$5 billion reduction, and US$4.3 billion in debt service savings during the International Monetary Fund programme.

“Additionally, average interest rate on the bonded debt has decreased from over 8% to less than 5%,” he said. “These clauses demonstrate Ghana’s dedication to responsible debt management and transparency, aligning with international best practices.”

 

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