Ghana’s economic growth remains negative, rating at B3 – Moody’s

• Ghana’s economic outlook has been rated as negative

• According to Moody’s the country’s long term issuer ratings stands at B3

• This is as a result of the country’s increasing debt burden

Ghana’s economic outlook has been rated negative by the international ratings agency, Moody’s, according to a Joy Business report.

The agency has also affirmed the country’s long term issuer rating’s at B3.

This development, according to the portal, reflects Ghana’s high and increasing debt burden which will likely not reduce any time soon.

The agency also cited a persistent weak debt affordability, high gross borrowing requirements and liquidity challenges, social and financial risks following at the onset of the coronavirus pandemic, as its reasons for the ratings.

“Ghana’s credit profile is characterized by large gross borrowing requirements that exceed 20% of GDP, as well as persistent weak debt affordability stemming from interest payments rising to over 40% of revenue — both of which are among the weakest of sovereigns rated by Moody’s, underpinning its exposure to potential funding shocks.”

It continued, “both long-standing credit characteristics are the result of a high debt burden financed at relatively high costs and relatively short maturities. These vulnerabilities have been exacerbated by the pandemic. The fiscal deficit widened to 13.9% of GDP in 2020 (inclusive of costs associated with the financial sector clean-up and “take or pay” energy contracts), pushing the debt burden beyond 80% of GDP, from 62.6% in 2019.”

Moody’s further added that Ghana’s pace towards consolidation may move at a slow pace which will, in turn, leave a debt burden of above 80 percent of GDP in the near future.

It, however, pointed that while government’s 2021 budget and fiscal policy sought to carve a path towards fiscal consolidation in a bid to reduce the fiscal deficit to 4.8% by 2024, there are still concerns about the coronavirus pandemic setting back long term economic and social efforts.

Moody’s said Ghana will, for the time being, depend on domestic and international bond issuance to address financing needs.

“In the meantime, Ghana will increasingly rely on domestic and international bond issuance to meet deficit financing requirements and Eurobond maturities starting 2023 and rising to $1 billion per year 2025-2027, leaving the sovereign exposed to a potential unfavorable turn in investor confidence”, Moody's added.