Ratings agency, Moody’s, says it will upgrade Ghana’s ratings on the back of a lengthening track record of the government’s spending discipline and sustained improvements in revenue generation, demonstrating improving fiscal policy effectiveness.
According to the ratings agency, a progress in addressing fiscal risks would reinforce confidence around the durability of fiscal improvements.
It further stated that a sustained strengthening of external buffers that enhance Ghana’s capacity to absorb external shocks would also support upward rating pressure.
However, it warned that a downward pressure on Ghana’s rating would emerge if financing conditions durably deteriorated, increasing refinancing risks and reversing improvements in debt affordability.
“Such a reversal could result from the government’s weakening ability to deliver fiscal consolidation, eroding policy credibility and likely generating government liquidity pressures”.
It added that a durable erosion of foreign-currency buffers, possibly due to a large and sustained external shock, that threatened macroeconomic stability and the government’s capacity to service its foreign-currency obligations, would also lead to downward rating pressure.
Moody’s over the weekend upgraded Ghana’s long-term foreign currency and local currency issuer ratings to B3 from Caa1 and changed the outlook to stable from positive.
It also upgraded Ghana’s foreign currency senior unsecured debt ratings to B3 from Caa1 and the foreign and local currency senior unsecured MTN program ratings to (P)B3 from (P)Caa1.
The upgrade reflects a sustained easing in Ghana’s domestic financing conditions that has led to a reduction in financing costs and a meaningful improvement in debt affordability, albeit from a weak level.
The financing costs have also remained lower despite external headwinds from the Middle East conflict, something Moody’s described as a reflection of continued fiscal discipline, which is underpinned by institutional improvements, and favourable export prices that support macroeconomic stability.