Fitch anticipates Ghana’s debt to decline to 87% of GDP by end of 2023

Fitch expects a further reduction in Ghana’s debts for the 2024 and 2025 financial years

Fitch Solutions, a multinational rating agency, says it anticipates Ghana’s debt to decline to 87% of gross domestic product (GDP) at the end of 2023 in contrast to 89% of GDP in 2022.

The reduction, according to Fitch, was due to the 50% haircut on the Bank of Ghana’s holdings of non-marketable debt, which represented a debt reduction of 4.2% of the estimated 2023 GDP.

The reduction was disclosed in a recent report that assessed the creditworthiness of Ghana.

The rating agency said it expected that the reduction in public debts would partly offset the 33% year-on-year cedi depreciation compared with the same figure by the end of 2022 and the primary deficit.

Fitch expects a further reduction in Ghana’s debts for the 2024 and 2025 financial years.

The rating agency based its projections on the debt reduction for 2024 and 2025 on a proposed 30% haircut on external debt considered for restructuring, year-on-year cedi depreciation of 20% in 2024 and 9% in 2025, and a GDP deflator of 21% and 10% respectively.

The rating agency said public debt would fall by 78% by 2025; however, it emphasised that there was a high degree of doubt surrounding the conclusiveness of external debt restructuring due to constraints.

Fitch said Ghana’s current account would reach surplus status owing to the non-payment of interest on selected external debt pending a restructuring and a noticeable decrease in merchandise imports.

It said that depending on the success of external debt restructuring, the current account could remain surplus in 2024 and 2025.

According to its forecast, the 2024 surplus could reach 1.2% of GDP, in contrast to 1.8% in 2025.

The rating agency said the Central Bank’s international reserve would increase by $1.1 billion per year in 2023–2025 due to current account surpluses and projected disbursements from international financial institutions.

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