Global rating agency, Fitch has downgraded Ghana’s creditworthiness revised its outlook to Negative from Stable and affirmed the ‘B’.
According to Fitch, it was forced to revise Ghana’s outlook to negative because of the significant deterioration in public finances supervised by the Akufo Addo administration and exacerbated by the Covid-19 pandemic.
The ‘B’ rating reflects the high public debt level and low revenue base, which means Ghana will have to contend with high-interest rates on its borrowing internationally.
According to Fitch, Ghana’s public finances remain the key weakness.
After achieving a general government deficit on a commitment basis below 5% of GDP in the three years prior to 2020, the deficit widened to 11.5% of GDP following the approval of a mid-year supplementary budget that contained an additional 3% of GDP in Covid-19-related spending.
According to Fitch, when arrears clearance and support for the financial and energy sectors are added, the cash deficit reached an estimated 14% of GDP.
Meanwhile, despite the increase in government debt, Ghana has good access to fiscal and external financing.
The government recently issued USD3 billion in Eurobonds and is planning another USD1 billion, which will be enough to cover the USD3.3 billion in external debt principal and interest payments says Fitch.