Financial sector stakeholders have expressed optimism following Moody’s recent upgrade of the country’s credit rating, viewing it as a positive sign for the nation’s economic recovery and future growth prospects.

On October 11, 2024, Moody’s Ratings upgraded Ghana’s long-term local and foreign currency issuer ratings to Caa2 from Caa3 and Ca respectively, while also changing the outlook to positive from stable.

This marks Ghana’s first rating upgrade since February 2022, signalling a potential turning-point in the country’s financial standing.

Minister of Finance Dr. Mohammed Amin Adam hailed the upgrade as a significant milestone in Ghana’s economic journey.

He emphasised that this development, coupled with Fitch Ratings’ recent positive assessment, underscores the success of Ghana’s comprehensive debt treatment and ongoing economic reforms.

Dr. Adam stated: “This upgrade resulted from the completion of Ghana’s comprehensive debt treatment, which provided meaningful relief to government finances. As the first substantive upgrade on our credit rating, it comes on the heels of Fitch Ratings’ assignment of Ghana’s new USD bonds a ‘CCC+’ rating and upgrade of the Long-Term Local-Currency Issuer Default Rating to ‘CCC+’ from ‘CCC’.”

Finance Minister Adam highlighted the country’s impressive economic rebound, noting: “Ghana’s growth has impressively rebounded this year, rising from 4.7 percent in the first quarter to 6.9 percent for the second quarter, surpassing post-debt restructuring episodes of growth projections. Inflation has halved from the pre-debt restructuring days and our debt is on a declining path, with a reduction of almost 7-percentage points of GDP.”

Dr. Adam assured the public of government’s continued commitment to reform, stating: “Lessons from the painful debt restructuring exercises and the sacrifice of all Ghanaians continue to spur us on to consolidate all gains through our strong reform agenda, characterised by fiscal discipline, institutional reforms and an emphasis on growth through small and medium scale enterprises”.

Moody’s cited Ghana’s extensive debt treatment as the primary driver for its upgrade, which has provided substantial relief to government finances. The rating agency noted: “Debt restructuring, along with the debt service moratorium imposed during the negotiation period, has reduced government’s debt burden from a peak 93 percent of GDP in 2022 to an expected 81 percent for 2024”.

The positive outlook reflects potential for further improvement, with Moody’s stating: “Should the risk factors mentioned above dissipate, Ghana’s rating could migrate to a higher level”.

Analysts in the financial sector have also weighed in on the implications of this upgrade. Kofi Kyei Busia, an analyst at the Young Investors Network (YIN), expressed modest optimism about the potential for further rating upgrades by other agencies reflecting the improvement in Ghana’s financial standing.

He stated: “I firmly believe that Moody’s upgrade is a significant step forward – and we can expect other rating agencies to follow suit in the near future. The credit rating of a country is essentially a commentary on the perceived ability of a sovereign to service its debt; and with Ghana demonstrating fiscal discipline and progress in debt restructuring, there is every reason to expect that Fitch, Standard & Poor’s and others will take similar actions. This isn’t just about numbers; it’s about trust – trust that Ghana is on a path to recovery and financial responsibility.

“However, while this upgrade is promising, it’s crucial to remain cautious. Translating this positive outlook into tangible market benefits – such as renewed investor interest, lower borrowing costs and enhanced access to capital – will depend on how we manage the risks still ahead.

Investors will want to see consistency in fiscal reform, inflation control and sustained economic growth. If Ghana can maintain this momentum, I am optimistic that we will see stronger interest in our market, paving the way for more favourable economic conditions.”

The Bank of Ghana already had built sufficient reserves – reported at US$7.5billion or 3.4 months of import cover – by the end of August 2024 to support government’s debt servicing obligations While the upgrade is seen as a positive development, challenges remain.

Moody’s cautioned about potential risks including: “The resumption of debt service payments, fiscal risks in the run-up to the December elections, potential negative pressure on the currency as well as reliance on expensive short-term debt represent still-elevated liquidity risk, constraining the rating”.

The upgrade comes as the nation continues to implement reforms under its IMF programme, which is expected to further strengthen policy credibility and improve access to low-cost funding from official sector sources.

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