Adnan Adams Mohammed
Ghana’s economy is likely to end 2023 with a public debt to GDP ratio of 99 percent, Fitch Solutions has said. The projected public debt figure is an increase from the previous 88% recorded in 2022.
The primary driver for this projected rise is the depreciation of the cedi against the US dollar, with the local currency having already lost about 11.80% in value to the dollar on the retail market and 22% on the interbank market.
Ghana faces stive debt accumulation matrix. But Fitch is projecting that the public debt could decline by 4 percent of GDP at the end of 2024 to 95% of GDP and further to 94% in 2025 at the back of continues fiscal consolidation and stabilisation of the cedi.
Meanwhile, the International Monetary Fund (IMF) had previously projected a decline in Ghana’s debt-to-GDP ratio for 2023 to 84.9% from 92.4% in 2022.
The October 2023 Fiscal Monitor indicated an expected consistent decline in the country’s total debt-to-GDP ratio over the next five years.
Ghana has faced challenges in its public finances last year, leading to restricted access to Eurobond markets and a significant decline in external liquidity.
This resulted in credit downgrades, including a downgrade to ‘CCC’ by Fitch and subsequent placement on restricted default (‘RD’) in early 2023.
Despite the downgrades, Fitch notes that foreign-currency debt constitutes less than 40% of Ghana’s total public debt, well below the ‘B’ median.
The agency acknowledges Ghana’s stronger levels of governance compared to the ‘B’ median and its democratic record with peaceful transitions of power since 1992.
However, Fitch expresses concerns about the country’s weaknesses, including a low international liquidity position, low per-capita income and human development indicators, and a heavy reliance on exports of oil, gold, and cocoa, exposing it to commodity price volatility.
