Fitch upgrades Ghana’s Long-Term Local-Currency IDR to ‘CCC’

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Fitch Ratings has upgraded Ghana’s Long-Term Local Currency Issuer Default Rating (IDR) to ‘CCC’ from ‘RD’.

The ratings agency has also affirmed the country’s Long-Term Foreign-Currency IDR at ‘RD’ and the Country Ceiling at ‘B-‘.

Fitch has assigned ‘CCC’ ratings to two interest-only bonds issued on completion of pension funds holdings of domestic debt exchange.

Fitch has also assigned ‘CCC’ ratings to four domestic US dollar-denominated bonds issued on 4 September 2023.

According to the rating agency, the upgrade of Ghana’s Long-Term Local-Currency Issuer Default Rating (IDR) follows the completion of the Domestic Debt Exchange Programme (DDEP).

Fitch considers that as a result of a series of domestic debt exchanges, Ghana has normalised relations with a significant majority of local currency creditors, with a participation rate of 92% on local-currency government bonds (with similarly participation for Cocobills and locally issued foreign-currency bonds).

Sizeable debt service reduction

The local-currency debt exchanges represent a debt service reduction of GHC52 billion in 2023 (6% of estimated 2023 GDP or 39% of estimated 2023 revenue and grants).

According to the IMF, debt service represented 117% of revenue in 2022. Of this total debt service reduction, Fitch estimates the interest payment reduction in 2023 amounts to 1.8% of GDP or 12% of revenue and grants.

The domestic US dollar-denominated debt exchange adds another GHC5 billion (0.6% of GDP, 4% of revenue and grants) debt service reduction in 2023, and a further reduction is coming from the 50% principal haircut agreed with Bank of Ghana on its holdings of GHC71 billion local-currency nonmarketable debt.

These debt exchanges have brought down interest payments to a still high 38% of revenue and grants in 2023, from 47% in 2022 (commitment basis, including interest payments that are due in 2023 on external debt).

The rating agency said it considers another round of local-currency debt exchange as unlikely in the near term.

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