Moody’s Hints about Upgrading Ghana’s Credit Ratings
Moody’s Ratings said it has completed a periodic review of the ratings of Ghana and other ratings that are associated with the issuer; hinted about upgrading the country’s credit if the government delivers on fiscal consolidation.
The global ratings agency said Ghana’s ratings, including its Caa2 long-term issuer ratings, reflect the government’s still-significant debt burden and liquidity challenges following the completion of debt restructuring under the G20 Common Framework, a process that started in December 2022.
“We expect that fiscal consolidation supported by an IMF programme and relatively robust institutional capacity will lead to a gradually falling debt burden and easing liquidity risk”.
According to Moody’s, Ghana remains vulnerable to foreign currency risk, with half of debt denominated in foreign currency, while high inflation and tight monetary policy constrain liquidity on domestic markets.
The review note stated that the presentation of the 2025 budget revealed marked fiscal slippages during the 2024 election cycle, with the headline central government budget deficit widening to 7.9% of gross domestic product (GDP) on a commitment basis against a target deficit of 4.2% of GDP.
That said, Moody’s analysts expect the authorities’ commitment to the IMF programme will underpin spending-led fiscal consolidation efforts, and forecast the headline budget deficit to narrow below 4% of GDP this year.
With Ghana’s external market access constrained and domestic financing reliant at present on T-bill issuances, progress on the programme will remain essential to catalyse broader official sector financing and mitigate liquidity risks, Moody’s said.
“We expect a moderation in real GDP growth from 5.7% in 2024 to an average of 4.2% in 2025-26, under a more restrictive fiscal and monetary policy environment”.
The review note stated that Ghana’s “ba2” economic strength assessment balances the country’s growth potential in the oil and non-oil sectors against its small size and low wealth levels.
Its “caa2” institutions and governance strength primarily reflects very weak fiscal and monetary policy effectiveness, which ultimately led to unsustainable government debt and the 2022-24 debt restructuring.
“We assess Ghana’s fiscal strength at “ca”, reflecting very weak debt affordability and a high debt burden, although debt restructuring has provided some financial relief”.
Moody’s said Ghana’s susceptibility to event risk at “ca” is driven by elevated government liquidity risk due to high government gross borrowing requirements and very limited borrowing options.
The positive outlook reflects the potential for liquidity risk to ease amid significant intended fiscal consolidation efforts, Moody’s said.
In the review note, Moody’s maintained that the IMF programme will help strengthen policy credibility and foster Ghana’s access to low-cost funding from official-sector sources, an important complement to Ghana’s current reliance on expensive short-term debt to meet elevated funding needs.
That said, large fiscal arrears and vulnerability to currency depreciation represent important credit challenges at the current rating level. “We would likely upgrade Ghana’s ratings if the government delivers on fiscal consolidation, maintaining a primary surplus, and secures improved funding access, ultimately reducing liquidity risk.
“In such a scenario, the external profile of the country should continue to strengthen, supported by official-sector funding but also by gold exports and remittance inflows, engendering improved currency stability.
“Ultimately, these developments would increase the likelihood that government debt reduction will continue over the medium term, supporting a higher rating level.
“We would likely change the outlook from positive to stable if the government struggles to access more affordable funding sources, both domestically and externally, perpetuating liquidity risk.
“A weakening commitment to fiscal consolidation would, particularly after the significant arrears accumulated in 2024, erode policy credibility and likely generate liquidity pressure”, Moody’s said. First Holdco Falls below N1 Trillion in Equities Market
