Fitch upgrades Ghana’s rating to ‘CCC’ from Restrictive Default

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

The UK-based firm has also affirmed Ghana’s Long-Term Foreign-Currency IDR at ‘RD’ and the Country Ceiling at ‘B-‘.

Fitch assigned ‘CCC’ ratings to two interest-only bonds issued on completion of pension funds holdings of the Domestic Debt Exchange.

It again assigned ‘CCC’ ratings to four domestic US dollar-denominated bonds issued on September 4, 2023.2023.

The upgrade of Ghana’s Long-Term Local-Currency IDR, it said, follows the completion of the Domestic Debt Exchange Programme.

“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 Cocoa bills and locally issued foreign-currency bonds). Some non-participating bondholders are domestic individual bondholders, for which the authorities have publicly stated being current on the payments following a memorandum of understanding signed in May 2023”, it said.

Sizeable debt service reduction

Fitch said the local-currency debt exchanges represent a debt service reduction of ¢52 billion in 2023 (6% of estimated 2023 GDP or 39% of estimated 2023 revenue and grants).

According to the International Monetary Fund, the debt service represented 117% of revenue in 2022.

“Of this total debt service reduction, we estimate the interest payment reduction in 2023 amounts to 1.8% of Gross Domestic Product (GDP) or 12% of revenue and grants”, Fitch added.

Fitch continued that the domestic US dollar-denominated debt exchange adds another ¢5.0 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 the Bank of Ghana on its holdings of ¢71 billion local-currency nonmarketable debt.

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