Ghana’s economy has seen minute light in the dark as rating agency Fitch upgrades Ghana’s long-term local-currency issuer default rating from ‘restricted default’ to ‘CCC’
The upgrade which occurred on Wednesday, March 22, 2023 has tossed some hope at the government who has faced myriad macroeconomic problems.
The country had defaulted on most of its $29 billion external debt last year, skyrocketed interest payments and inflation added to the country’s woes leaving it no option but negotiations with its private international bondholders and bilateral creditors.
Worst economic outlook and poor management of the economy led to other rating agencies to further downgrade the country’s creditworthiness which consequently compelled the government to seek an IMF bailout- a move apparently opposed by the country’s Finance Minister Ken Ofori Atta.
As part of getting an IMF deal, Ghana was required to restructure its debt. The news about the debt restructuring was however not welcomed by Ghanaian bond holders as they bemoaned ‘haircuts’ in their coupon payments.
Continuous efforts by the Finance Ministry garnered ample support for the government’s Domestic Debt Exchange Program though not all bond holders subscribed to the program.
According to Fitch, Ghana has succeeded in restructuring its domestic debt hence the upgrade.
The West African country has already restructured its domestic debt, which will lower its interest payments by 10% of the government’s expected revenues or 1.6% of GDP in 2023, and 6% of revenues or 0.9% of GDP in 2024, Fitch said.
Despite this immediate relief, the restructuring has increased Ghana’s debt-to-GDP ratio by 0.6 percentage points and the ratio is still above 100% after the process, Fitch added.
Ghanaians have said this may be the sign of new beginning as inflation rate figures from the Ghana Statistical Service show a decreased rate of 52.8% in February 2023, from 53.6% in January.
Some political analysts however have said this upgrade is nothing worth celebrating since some bond holders have had their funds affected in the Domestic Debt Exchange program.