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Moody’s predicts slower pace of consolidation.. with debt burden above 80% of GDP

Adnan Adams Mohammed


International Rating Agency, Moody’s, last week affirmed Ghana’s B3 long-term issuer ratings and maintained the negative outlook.


It attributed the negative outlook to  Ghana’s high debt burden that is unlikely to fall rapidly. It also, cited the unchanged weak debt affordability, high gross borrowing requirements and ongoing liquidity challenges amid economic, social and financial risks in the aftermath of the COVID-19 pandemic.


Moody’s noted that the rating affirmation takes into account the country’s improving growth prospects, resilient external sector performance and continued access to domestic and international capital markets, supported by the government’s structural reform agenda to improve export competitiveness and broaden the revenue base.


“The pace of consolidation will be slower, leaving the debt burden above 80% of GDP for the foreseeable future”, Moody’s Investors Service said in a statement.


It added that Ghana will increasingly rely on domestic and international bonds issuance to meet debt financing requirements and Eurobond maturities starting in 2023 and rising to USD1bn per year between 2025 and 2027, ‘leaving the sovereign exposed to a potential unfavourable turn in investor confidence’.


Moody’s has concurrently affirmed the B3 foreign currency senior unsecured debt ratings, the (P)B3 senior unsecured MTN programme rating and the B1 rating of the bond enhanced by a partial guarantee from the International Development Association (IDA, Aaa stable).


Ghana’s local currency (LC) country ceiling remains unchanged at Ba3 and the foreign currency (FC) country ceiling unchanged at B1.


Moody’s assessment is that non-diversifiable risks are appropriately captured in a LC ceiling three notches above the sovereign rating, taking into account relatively predictable institutions and government actions, low domestic political, and geopolitical risk; balanced against a large government footprint in the economy and the financial system, external imbalances, and reliance on revenue from commodities that can lead to country-wide stress.


The FC country ceiling is maintained one notch below the LC country ceiling, reflecting existing constraints on capital account openness, balanced against moderate fiscal and monetary policy effectiveness.



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