In a significant development, Fitch, the ratings agency based in the UK, has raised Ghana’s Long-Term Local Currency Issuer Default Rating (IDR) to ‘CCC’ from Restricted Default ‘RD.’
This positive adjustment comes on the heels of the successful completion of the Domestic Debt Exchange Programme. Fitch has also maintained Ghana’s Long-Term Foreign-Currency IDR at ‘RD’ and the Country Ceiling at ‘B-‘.
The agency assigned ‘CCC’ ratings to two interest-only bonds issued upon the finalization of pension funds holdings resulting from the Domestic Debt Exchange.
Furthermore, Fitch has bestowed ‘CCC’ ratings upon four domestic US dollar-denominated bonds issued on September 4, 2023. The ratings upgrade reflects the positive impact of the local-currency debt exchanges, representing a substantial debt service reduction of ¢52 billion in 2023.
This reduction accounts for 6% of the estimated 2023 GDP or an impressive 39% of the estimated 2023 revenue and grants.
Remarkably, Fitch underscores that the local-currency debt service reduction is particularly significant given that it stands at 117% of revenue, as reported by the International Monetary Fund in 2022.
In addition, Fitch notes that the domestic US dollar-denominated debt exchange contributes another ¢5.0 billion (0.6% of GDP, 4% of revenue and grants) to the debt service reduction in 2023.
Further reductions are anticipated from the 50% principal haircut mutually agreed upon with the Bank of Ghana concerning its holdings of ¢71 billion local-currency nonmarketable debt.
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
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 stated.
