Despite a significant redemption reprofiling and a substantial reduction in interest rates, Ghana’s public debt-to-Gross Domestic Product (GDP) has only decreased by one percentage point to just above 100% of GDP, according to rating agency Fitch.
This assessment was made using the standard 5% discount rates that apply in the International Monetary Fund/World Bank debt sustainability framework for low-income countries. Fitch also noted that the domestic debt exchange has increased the debt-to-GDP ratio by 0.6 percentage points due to payment-in-kind coupons that correspond to an increase in the face value of new bonds compared to the face value of tendered bonds.
Furthermore, Fitch stated that the IMF’s support for Ghana is likely to depend on the government’s ability to demonstrate a clear path towards reducing the present value of debt to 55% of GDP over the forecast horizon, as per the IMF/World Bank debt sustainability analysis.
This support also hinges on the ability of official bilateral creditors to provide financing assurances in the context of the Common Framework external debt restructuring that Ghanaian authorities have requested. Although discussions have begun among some official creditors, Fitch emphasized that the official creditor committee responsible for providing financing assurances has not yet been created.
Therefore, it does not anticipate the provision of financing assurances, which would pave the way for an IMF Board approval of the Extended Credit Facility (ECF) arrangement and for a new debt sustainability analysis to be published, before the end of the second quarter of 2023.