Fitch Rates Ghana's Economic Negative

Global rating agency Fitch has affirmed Ghana's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'B' with negative outlook.

It also affirmed Ghana’s Short-term foreign currency IDR at ‘B’ and Country Ceiling at ‘B’. The issue ratings on Ghana’s senior unsecured foreign and local currency bonds have been affirmed at ‘B’.

This, according to Fitch, was as a result of the fiscal and external risks which remain high and complicated by a slowing economy and low commodity prices.

An IMF programme, agreed earlier this year by the government, has improved policy credibility, commitment to fiscal reforms and access to external financing, the rating agency said.

'The most significant reform has been to deregulate fuel prices, largely eliminating the risk that the authorities will re-introduce fuel subsidies.

'However, a high degree of uncertainty remains ahead of parliamentary and presidential elections due in late 2016, which may see spending pressures re-emerge as in past electoral cycles,' it said.

Debt
The agency said Ghana’s debt structure has also deteriorated, explaining that foreign currency debt is now 60 percent of total debt, against less than half in 2011, largely driven by increased non-concessional financing, leaving the country more exposed to a weaker exchange rate.

'Domestic debt maturities have steadily declined. High domestic yields and a 60 percent depreciation in the currency since 2012 have pushed up borrowing costs, with interest payments now accounting for one-third of government revenue -the highest level among Fitch-rated sub-Saharan African sovereigns,' it said.

The agency said financing the deficit is expected to remain challenging, particularly with the IMF programme restricting deficit financing by the Central Bank to 0 percent next year.

Revision Of Outlook
'The outlook is negative. Consequently, Fitch’s sensitivity analysis does not currently anticipate developments with a material likelihood, individually or collectively, of leading to an upgrade,' it said.

However the rating agency said future developments that may, individually or collectively, lead to a revision of the outlook to stable include an effective fiscal consolidation that places debt-to-GDP firmly on a downward trajectory and an improvement in Ghana’s external position reflected in a narrowing of the country’s current account deficit and an improvement in international reserves.