Ghana faces credit downgrade unless local bond market reopens — Fitch
Global credit rating agency Fitch Ratings has warned that Ghana’s recent credit upgrade to B– with a stable outlook could be short-lived if key risks are not addressed, chief among them being the failure to reopen the local bond market and achieve fiscal discipline.
The caution follows Fitch’s decision to raise Ghana’s long-term foreign currency issuer default rating from restricted default (RD) to B–, reflecting the country’s ongoing efforts under the International Monetary Fund (IMF)-supported program.
However, the UK-based agency outlined several downside risks that could trigger a fresh downgrade.
In its latest update, Fitch cited the inability to refinance upcoming maturities in the domestic bond market as a major vulnerability. Ghana has not yet successfully reopened its local currency bond market to investors following the domestic debt exchange program. A failure to do so soon could erode investor confidence and worsen liquidity pressures.
“Lower confidence in the sovereign’s capacity to refinance maturities due in the short to medium term, including an inability to reopen the local currency bond market, could undermine Ghana’s repayment capacity,” the agency noted.
Fitch also pointed to the risk of renewed liquidity pressures, particularly if Ghana’s fiscal consolidation plan underperforms or if contingent liabilities materialize, placing additional strain on the government’s resources.
The agency warned that a deterioration in external liquidity, such as a decline in international reserves due to widening current account deficits, could further strain the economy.
“External liquidity pressures, including a fall in international reserves, for example, due to current account deficits—remain a critical risk factor,” the agency stated.
Ghana’s international reserves, although recovering under IMF reforms and cocoa inflows, still fall short of median levels for countries in the B-rated category.
On the upside, Fitch outlined key reforms that could enhance Ghana’s credit profile. These include a sustained decline in debt-to-GDP ratios, backed by a credible and effective medium-term fiscal consolidation.
It also noted that a steady build-up in international reserves, approaching median levels for similarly rated countries, could boost macroeconomic stability and market confidence in the country’s ability to meet its debt obligations.
“A stronger fiscal framework and better reserve buffers could lead to positive rating action,” Fitch added.
Fitch maintained Ghana’s Country Ceiling at B–, equal to its long-term foreign currency rating, implying no additional constraints on capital movement or currency convertibility that would impair private-sector debt service.
However, the agency highlighted environmental, social, and governance (ESG) concerns. Ghana received an ESG Relevance Score of “5” for Political Stability and Rights, reflecting persistent governance weaknesses. Fitch noted the country’s percentile rank, which falls below 50 in governance metrics, negatively impacting its credit profile.
Ghana also scored a “4” for Creditor Rights, with Fitch stating that the willingness to repay debt remains a crucial factor in its sovereign rating assessments.
