Moody’s Upgrades Ghana’s Outlook from Stable to Positive

Moody’s Investors Service has upgraded Ghana’s long-term local and foreign currency credit ratings to Caa2 from Caa3 and Ca, respectively, citing successful debt relief measures and fiscal improvements, while revising the outlook to positive from stable.

The upgrade follows Ghana’s comprehensive debt restructuring under the G20 Common Framework, culminating in a eurobond exchange on Oct. 9. Moody’s said the measures, including a 37% haircut on most eurobond principal and rescheduling of local currency and bilateral official-sector debt, have reduced the government’s debt burden from 93% of GDP in 2022 to an expected 81% in 2024, easing pressure on public finances.

While the rating reflects progress, Moody’s highlighted ongoing risks, including the resumption of debt payments, reliance on high-interest short-term Treasury bills, and fiscal pressures ahead of the December 2024 elections, leaving liquidity challenges elevated. Close to half of government debt is denominated in foreign currency, exposing the country to potential cedi volatility.

The positive outlook signals that these risks could diminish through sustained fiscal consolidation, supported by an IMF-backed programme, robust gold exports, and continued access to official-sector funding. Moody’s said Ghana’s relatively strong institutions and the transparent handling of the debt restructuring could allow for a quick improvement in creditworthiness.

The rating upgrade carries practical significance for Ghana. It may help the government borrow at lower interest rates, particularly from official lenders or in new bond issuances, while signaling improved investor confidence. Moody’s also suggested that fiscal discipline, combined with external support, could contribute to greater currency stability, supporting the cedi against volatility.

On social and environmental fronts, Moody’s noted that Ghana faces moderate to high risks, including climate-related agricultural shocks, limited access to quality housing and healthcare, and constrained fiscal policy due to high debt service. The country received an ESG Credit Impact Score of 5, reflecting these ongoing social and institutional pressures.

Moody’s also raised Ghana’s local and foreign currency country ceilings to B2 and B3, respectively, consistent with the sovereign rating upgrade, while existing debt instruments were not immediately affected. The agency said further upgrades would depend on continued fiscal consolidation, a primary surplus, and reduced liquidity risk, while setbacks such as arrears accumulation or weaker funding access could reverse gains.

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