Finance Minister welcomes Moody’s upgrades

The Minister of Finance, Dr Mohammed Amin Adam, has welcomed the positive ratings assigned Ghana’s economy by Moody’s, a ratings agency, describing it as a positive development. 

The minister said the upgrade of Ghana’s long-term local and foreign currency issuer ratings to Caa2 from Caa3 and Ca with a positive outlook was a very positive development.

“In fact, this is Ghana’s first rating upgrade since February 2022,” he stated.

He said the upgrade resulted from the completion of Ghana's comprehensive debt treatment, which provided meaningful relief to government finances.

Moody’s

Credit rating agency, Moody's, upgraded Ghana's credit ratings, reflecting significant improvements in the country's financial situation.

The agency upgraded Ghana's long-term local and foreign currency issuer ratings to "Caa2" from "Caa3" and "Ca," respectively.

The US-based firm also revised the country's outlook to "positive" from "stable."

In a statement, it explained that the "positive outlook reflects the potential for liquidity risk to ease amid ongoing fiscal consolidation efforts supported by the International Monetary Fund (IMF)".

Context

The upgrade follows significant progress made by the country in its debt restructuring exercise which is expected to reduce debt to Gross Domestic Product (GDP) to 55 per cent by 2026.

Ghana has made remarkable progress in its debt restructuring activities, with the government exchanging local bonds worth GH¢82 billion for 12 new ones at reduced coupon rates and longer tenors.

On the external front, the country has also finalised its agreement with its bilateral creditors to restructure debts of $5 billion.

Recently, the country’s consent solicitation to seek the permission of Eurobond holders to amend the original terms of the bonds saw over 98 per cent participation from investors.

The debt treatment yielded a 37 per cent reduction in the nominal value of Ghana's debt, equivalent to $5 billion forgiveness, and $4.3 billion in debt service savings during the IMF programme.

Last week, the IMF staff and Ghana reached an agreement on their third review of the country's $3 billion Economic Facility Credit (ECF) programme.

It is based on this progress that Moody’s has now revised the country’s ratings upwards.

The rating agency, earlier this year, indicated that it was likely to upgrade Ghana’s credit rating following the country’s Eurobond exchange.

The agency said it had completed a periodic review of Ghana’s ratings, including its long-term issuer ratings of Caa3 for local currency and Ca for foreign currency.

These ratings, it said, reflected the government’s ongoing debt restructuring under the G20 Common Framework initiated in December 2022.

“The restructuring of foreign currency debt, which constitutes nearly half of Ghana’s total debt, has progressed significantly following announcements in June 2024 regarding a Memorandum of Understanding on official sector debt and an agreement in principle with bondholders,” the statement from Moody’s said.

Substantive upgrade

Commenting on the development, Dr Amin Adam said it was the first substantive upgrade of the country’s credit rating, coming on the heels of Fitch Ratings’ designition of Ghana's new United States dollar bonds as 'CCC+' and upgrade of the Long-Term Local-Currency Issuer Default Rating to 'CCC+' from 'CCC'.

“All of these developments showcase the outcome of a successful IMF third review and the signal of support from the Eurobond holders' consent,” the Finance Minister said.

Dr Amin Adam said the country was definitely seeing very strong recovery on all fronts.

Growth has rebounded this year, rising from 4.7 per cent in the first quarter to 6.9 per cent in the second quarter, surpassing post-debt restructuring episodes of growth projections.

Inflation has halved from the pre-debt restructuring days and is on a declining path, with a reduction of almost seven percentage points of GDP.

Dr Amin Adam, however, assured Ghanaians that the government was not resting on its oars. 

The Finance Minister said lessons from the painful debt restructuring exercises and the sacrifice of all Ghanaians continued to spur the government on to consolidate all gains through strong reform agenda characterised by fiscal discipline, institutional reforms and an emphasis on growth through small and medium-scale enterprises.

Economist’s view

Economist and Lecturer at the Academic City University, Eugene Bawelle, also agress that the upgrade was positive for the economy.

He said it largely came on the back of the IMF which had acted as a check on the government.

“Due to the success of our debt restructuring exercise, this gives a clear indication on the way forward for the economy, so any kind of rating would definitely be a positive one, or at worst, would give a positive outlook in terms of the way the economy would go,” he stated.

Mr Bawelle urged the government to stay the course of the IMF programme, with elections coming up in the next two months.

“Because we are running into the elections, almost all the expenditures from half-year till now may not have been kept. The government will need to keep an eye on that, ensuring that we are achieving results on all the conditionalities so that the economy can fully be back on track,” he said.

Early success

Mr Bawelle also cautioned the government to look at the bigger picture of sustaining the gains in an election year.

He said although the upgrade would increase the country’s chances of re-assessing the international capital market, it should not be the immediate priority of the government.

“I am not sure the market is ready now. Looking at the fact that we are just coming out of the debt restructuring, it will be extremely too early for government to begin to go back to the international market to seek some form of funding, he added.