Josiah
Fitch Ratings has upgraded Ghana’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘B-‘ from ‘Restricted Default’ (RD). The Outlook is Stable.
The upgrade of Ghana’s Long-Term Foreign-Currency IDR to ‘B-‘ from ‘RD’ reflects Fitch’s assessment that Ghana has normalised relations with a significant majority of external commercial creditors.
Ghana restructured its USD13.1 billon Eurobonds in October 2024. About USD2.6 billion of non-performing external debt still needs to be restructured. Of this, Fitch considers USD700 million to be commercial debt, representing 5% of total external commercial debt initially included in the restructuring perimeter. Ghana is negotiating with these outstanding commercial creditors, and we assess holdout risks as small.
Debt Restructuring Near Completion: Ghana ratified the memorandum of understanding on the restructuring of its bilateral official debt in January 2025, covering USD5.1 billion. Of the USD2.6 billion of external debt that still needs to be restructured, USD1 billion is due to supranational entities and USD840 million is due to creditors that Fitch considers official. We expect Ghana will fully complete its external debt restructuring by end-2025.
Past Fiscal Slippage; Declining Deficits: The primary fiscal deficit (commitment basis) widened to 3.9% of GDP in 2024 from 0.2% in 2023, against a target of a 0.5% surplus, consistent with Ghana’s record of large fiscal slippages in election years. The arrears accumulated in 2024 are still being audited, and this commitment deficit may be revised down. The new administration targets a 1.5% primary surplus in 2025, mostly driven by primary expenditure reduction. We expect inflation-related expenditure pressures will contribute to a more gradual fiscal consolidation path. We forecast a primary surplus of 0.5% of GDP in 2025 and 0.9% in 2026 and an overall deficit of 3.6% in 2025 and 3.2% in 2026 on a commitment basis, after 7.9% in 2024.
Manageable Debt Service Obligations: We forecast foreign-currency-denominated debt service (including domestic US dollar-denominated bonds) will reach 1.2% of GDP (USD1.2 billion) in 2025 and 1.4% (USD1.9 billion) in 2026, assuming a restructuring of the remaining claims in 2025, with interest payments of 0.5% of GDP in 2025 and 0.4% in 2026. The rebound in unencumbered international reserves in 2024, to USD6.8 billion and our expectation of continued accumulation in 2025 and 2026, supports Ghana’s ability to meet these obligations.
We forecast local-currency debt service (excluding T-bill refinancing) will reach 3.8% of GDP in 2025 and 3.9% in 2026. Of this, 3.6% and 3.7% is interest payments. T-bond principal payments will increase to 2.2% of GDP in 2027 with the first domestic debt exchange programme (DDEP) bond maturities. We believe Ghana will be able to meet these obligations, based on our assumption that the T-bond market will be reopened in 2025, with an expected drop in inflation helping normalise market conditions.
Liquidity Risks: We expect the interest/revenue ratio will remain broadly stable, at 26% in 2025 and 2026, from 25% in 2024 and a peak of 48% in 2021. This will be driven by a declining stock of debt, offset by resumption of interest payments on external commercial debt and a step-up in coupon payments on the DDEP, with the weighted average coupon on the DDEP bonds increasing to 9.1% in 2025 from 5.4% in 2024. The interest/revenue ratio is above the ‘B’ and the ‘C’/’D’ medians of 13% and 16%, respectively, and is a key constraint on the rating.
Ghana had deposits of 4% of GDP at end-2024, and we project the government will slowly rebuild fiscal buffers, to 4.6% of GDP in 2026. Yields on T-bills have dropped significantly in recent months, reducing immediate liquidity risks. Our view of local-currency debt servicing conditions supports the upgrade of the Long-Term Local-Currency IDR.
Falling Debt: Strong nominal GDP growth, fiscal consolidation, remaining debt restructuring, and much larger than anticipated exchange rate appreciation in recent months will contribute to public debt falling to 60% of GDP in 2025 and 2026, from 72% in 2024 and a peak of 93% in 2022 when Ghana announced its intention to default. This compares with our 2026 ‘B’ median forecast of 51%.
Current Account Surpluses, Reserve Accumulation: We forecast the current account surplus (CAS) will narrow from a record high of 4.3% of GDP in 2024 to 1.1% in 2026, on our assumption of increased imports driven by economic growth, and a projected decline in key export prices. This is a shift from pre-default large deficits and compares favourably with the ‘B’ median deficit of 3% of GDP in 2026. It will enable Ghana to accumulate reserves of 3.9 months of current external payments in 2026, from 2.6 months in 2024 and 1.6 months in 2022 and against a ‘B’ median of 4.9 months in 2024. The evolution of gold prices significantly contributed to the CAS in 2024 and will be an important determinant of current account performance.
Inflation to Decline: We forecast inflation will average 15% in 2025 and 10% in 2026, down from 23% in 2024, helped by the large cedi appreciation since April 2025, a still tight monetary policy stance and fiscal consolidation. The size of the pass-through of exchange rate appreciation is uncertain, but we believe it will rapidly contribute to a moderation in domestic inflation, backed up by lower oil prices and international food prices. We project the Bank of Ghana will start cutting its policy rate in July 2025.
Resilient Growth: Real GDP growth has proved resilient throughout the restructuring process, at 3.1% in 2023 and 5.7% in 2024. We anticipate growth will remain solid, at 4% in 2025 and 4.5% in 2026, on a rebound in agricultural output after a steep decline in cocoa production in recent years, and a continued expansion of the industrial and services sectors.
ESG – Governance: Ghana has an ESG Relevance Score (RS) of ‘5’ for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model (SRM). Ghana has a medium WBGI ranking at the 50th percentile reflecting a recent record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law and a moderate level of corruption.
Reacting to the development, Finance Minister Dr. Cassiel Ato Forson described the upgrade as a significant milestone and a vote of confidence in Ghana’s future
