Ghana’s economic outlook has brightened considerably with a significant credit rating upgrade from Fitch Ratings, moving from ‘Restricted Default’ (RD) to ‘B-‘ with a stable outlook. This upgrade signifies renewed international confidence in Ghana’s financial stability and debt management capabilities, marking a crucial turning point in the nation’s post-default recovery. The upgrade is primarily attributed to Ghana’s successful efforts in restructuring its external debt, demonstrating a commitment to fiscal responsibility and regaining investor trust. The successful restructuring of $13.1 billion in Eurobond debt in 2024, coupled with progress in restructuring bilateral official debt, has significantly reduced the overhang of unresolved external debt.
Fitch acknowledged Ghana’s commitment to fiscal consolidation, despite a primary deficit in the 2024 election year. The government’s ambitious target of achieving a primary surplus in 2025 signals a dedication to restoring fiscal balance. While Fitch projects a more conservative surplus, the agency anticipates continued improvement in Ghana’s fiscal position in the coming years, underpinned by planned spending cuts and revenue enhancements. This fiscal discipline is expected to contribute significantly to debt reduction and overall macroeconomic stability. Moreover, with growing international reserves, Ghana is now better positioned to meet its external debt obligations, further strengthening its financial position.
While external debt restructuring has progressed significantly, domestic debt remains a challenge. However, declining Treasury bill rates and plans to reopen the long-term bond market are anticipated to alleviate liquidity pressures and facilitate more sustainable domestic debt management. The combination of external debt restructuring, fiscal consolidation, and improved domestic debt management is expected to lead to a significant decline in Ghana’s overall public debt-to-GDP ratio in the coming years.
Ghana’s macroeconomic indicators are showing positive trends across multiple fronts. Inflation, a major concern in recent times, is projected to decline steadily, supported by tight monetary policy, easing commodity prices, and currency appreciation. The Bank of Ghana is expected to begin cutting its policy rate soon, reflecting growing confidence in the country’s ability to manage inflationary pressures. Economic growth remains robust, driven by strength in key sectors like agriculture, industry, and services. These positive macroeconomic indicators further support the improved credit rating and reinforce the narrative of Ghana’s economic recovery.
Fitch’s assessment also acknowledges Ghana’s stable political environment, characterized by a tradition of peaceful democratic transitions. However, the agency also highlights ongoing challenges related to governance and corruption, which remain areas requiring continued focus and reform. The ‘Stable’ outlook assigned by Fitch reflects a balanced view of Ghana’s economic prospects, acknowledging both the progress made and the potential risks that remain. While the upgrade signals a positive trajectory, the agency cautions that renewed fiscal slippage or external shocks could negatively impact the rating. Conversely, further progress on reforms, continued growth in reserves, and consistent debt servicing could pave the way for future upgrades.
The upgrade to ‘B-‘ represents a significant step forward for Ghana, restoring access to international capital markets and attracting potential investors. While still within the speculative category, this improved rating positions Ghana for renewed engagement with international financial institutions and investors, opening opportunities for greater access to funding and further strengthening the country’s economic recovery. The upgrade underscores the effectiveness of Ghana’s economic policies and reforms, signaling a return to financial stability and a brighter economic outlook. It marks a pivotal moment in the country’s journey towards sustainable economic growth and development.
