Moody’s has upgraded Ghana’s local currency (cedi-denominated debts) long-term issuer rating from Ca to Caa3, while also maintaining a stable outlook. This upgrade reflects Moody’s assessment of Ghana’s progress in restructuring its local currency debt and achieving fiscal relief.
In addition to the local currency long-term issuer rating upgrade, Moody’s has also upgraded the local currency senior unsecured MTN program rating from (P)Ca to (P)Caa3. This upgrade follows the successful completion of the government’s main local currency debt restructuring, which has significantly reduced Moody’s expectation of future losses on local currency debt.
The debt restructuring efforts have provided Ghana with a measure of fiscal relief, signaling that the government is unlikely to pursue another debt restructuring of a similar scale in the near to medium term from the same creditors. The potential consequences for the country’s financial sector serve as a strong motivation for Ghana to avoid further restructuring and its associated damage.
Furthermore, Ghana has begun to receive official sector support, with the International Monetary Fund (IMF) disbursing the first tranche of funds under its program with the country. This support contributes to the positive outlook for Ghana’s fiscal stability and economic recovery, further bolstering investor confidence.
Despite the upgrade, it is crucial to acknowledge that the Caa3 rating still reflects the elevated risk of redefault, which remains a tangible concern until Ghana settles its local currency debt that has not been restructured and successfully restructures its foreign currency debt.
The stable outlook assigned by Moody’s indicates a balanced assessment of both downside and upside risks for Ghana’s economy. On one hand, a protracted negotiation process for the restructuring of the government’s foreign currency debt and increasing limitations on access to local currency funding present potential downside risks. These risks could potentially lead to another local currency debt restructuring with larger losses than currently indicated by the Caa3 rating.
On the other hand, the restructuring of foreign currency debt could progress relatively smoothly, supported by Ghana’s fiscal and external adjustment efforts, and with the assistance of the official sector, including the IMF. If these positive developments materialize, they would contribute to the country’s economic stability and reinforce the optimistic outlook.
The Moody’s upgrade and the stable outlook offer a positive signal for investors and stakeholders as Ghana continues its journey towards economic recovery and debt sustainability. The government’s unwavering commitment to fiscal discipline, along with the successful debt restructuring initiatives, plays a pivotal role in securing Ghana’s financial stability and regaining investor confidence in the country’s economic prospects.