Ghana has received a positive rating from Fitch Ratings, a global credit rating agency, after completing its Domestic Debt Exchange Programme (DDEP) successfully.
The programme, which involved exchanging local-currency debt instruments for new ones with lower interest rates and longer maturities, has reduced Ghana’s debt service burden and improved its relations with domestic creditors.
Fitch upgraded Ghana’s Long-Term Local Currency Issuer Default Rating (IDR) from restrictive default (‘RD’) to ‘CCC’, indicating that the country has made progress in addressing its debt challenges.
According to Fitch, Ghana has normalized relations with 92% of its local currency creditors, including holders of local-currency government bonds, Cocoa bills and locally issued foreign-currency bonds.
The debt exchange programme is expected to save Ghana GH¢52 billion in debt service payments in 2023, equivalent to 6% of the estimated 2023 GDP or 39% of the projected revenue and grants for that year.
This is a significant improvement from 2022, when debt service accounted for 117% of revenue, as per the International Monetary Fund (IMF).
Fitch also noted that the interest payment reduction for 2023 alone is estimated to be 1.8% of GDP or 12% of revenue and grants.
Moreover, the domestic US dollar-denominated debt exchange has added another GH¢5 billion to the debt service reduction for 2023, representing 0.6% of GDP and 4% of revenue and grants.
Another positive development is Ghana’s agreement with the Bank of Ghana to write off 50% of the principal amount of GH¢71 billion local-currency non-marketable debt held by the central bank. This will further ease Ghana’s debt service commitments and enhance its fiscal space.
According to Fitch Ratings, Ghana’s economic trajectory appears to be on an upward curve, with these debt management strategies being recognized and applauded by the rating agency.
