The International Monetary Fund support for Ghana will likely depend on the government’s ability to show a path towards bringing the present value of debt to 55% of Gross Domestic Product, international ratings agency, Fitch Ratings, has disclosed that.
This will be over the forecast horizon on the basis of the IMF/World Bank debt sustainability analysis and the ability of official bilateral creditors to provide financing assurances in the context of the Common Framework external debt restructuring that the Ghana government has requested.
In its comment after upgrading Ghana’s Long-Term (LT) Local-Currency (LC) Issuer Default Rating (IDR) to ‘CCC’ from ‘RD’, Fitch said it does not expect the provision of financing assurances, which will pave the way for an IMF Board approval of the ECF arrangement and for a new debt sustainability analysis to be published, before end of the second quarter of 2023.
Financing Still Constrained
The rating agency said despite the materialisation of increased confidence on the Local Currency debt market following the completion of the domestic debt restructuring, with yields on 91-day T-bills reaching 18.5% in March 2023 after 35.7% in February 2023, Fitch expects yields on T-bill auctions to remain elevated as inflation remains above 50% year-on-year.
“We do not foresee a resumption in Treasury bonds auctions in the near term”, it added.
It concluded that the lack of access to international capital market will continue to weigh on reserves, but more moderately than in 2022.
“Although the suspension of debt service lowers the current account deficit, which Fitch forecasts at 2.8% of GDP in 2023 after 4.1% in 2022, lack of access to international capital market will continue to weigh on reserves, but more moderately than in 2022”.