S&P Global Ratings has warned that Ghana’s sovereign credit rating might suffer in the next 12 to 18 months if fiscal reform momentum slows or external conditions worsen.
According to the agency’s most recent assessment, the government’s ability to refinance expiring liabilities could be weakened by a delay in fiscal consolidation, which could lead to larger deficits or greater debt servicing costs.
“It could lower our rating on Ghana over the next 12–18 months if fiscal reform momentum stalled, materially raising fiscal deficits or debt service costs, while straining the government’s ability to refinance maturing debt as it comes due,” S&P stated.
The agency also identified external sector risks, cautioning that unfavourable changes like deteriorating export volumes or lower terms of trade might further impact the nation’s credit profile.
S&P also highlighted concerns about Ghana’s continuing debt restructuring process, specifically the possibility of delays brought on by disputes amongst creditors under the G20 Common Framework.
Citing possible disagreements about comparability of treatment among creditor groupings, it continued, “Although not our base case, we could also consider a negative rating action if the remaining part of debt restructuring stalls.”
However, S&P pointed out that if fiscal restraint is maintained and external buffers keep getting better, upside risks still exist.
“It could raise the rating in the next 12–18 months if Ghana maintained low fiscal deficits, reducing debt service costs and strengthening its access to foreign financing, while its external position continued to strengthen, including via the accumulation of additional foreign currency reserves,” the agency said.
Despite these risks, S&P maintained Ghana’s foreign and local currency sovereign credit ratings for the long and short terms at “B-/B,” with a stable outlook, as the nation approaches the conclusion of its debt restructuring program.
The agency claims that the stable prognosis represents a balance between chronic vulnerabilities, such as high debt payment costs, sensitivity to commodity price swings, and implementation risks, and improved fiscal and external indicators, which are backed by continuing reforms.
With the completion of domestic debt restructuring in 2023 and the restructuring of $13.1 billion in Eurobonds in October 2024, Ghana’s restructuring process has advanced significantly since the default in 2022.
For over 97% of the targeted debt, the government has now reached agreements or finished restructuring.
According to S&P, the process has advanced following previous setbacks thanks to recent developments in talks with important creditors, such as the African Export-Import Bank and holders of Saderea commercial notes.
Additionally, the ratings affirmation coincides with an improvement in the performance of the external sector, which is mostly due to high gold prices.
S&P highlighted that recent progress in negotiations with major creditors, including as the African Export-Import Bank and holders of Saderea commercial notes, has aided in the process’s advancement following prior delays.
The ratings affirmation comes against the backdrop of increasing external sector performance, aided primarily by high gold prices.
Source: newsthemegh.com