Moody's Investors Service ("Moody's") has affirmed the Government of Ghana's long-term issuer and senior unsecured bond ratings at B3 and changed the outlook to positive from stable. Moody's has concurrently affirmed the rating of the bond enhanced by a partial guarantee from the International Development Association (IDA, Aaa stable) at B1.
The decision to assign a positive outlook reflects Moody's rising confidence that the country's institutions and policy settings will foster improved macroeconomic and fiscal stability over the medium term, in part as a consequence of the reforms implemented under the recent IMF reform program. Those reforms are beginning to bear fruit, as seen for example in the return to primary fiscal surpluses, measures to smooth the debt maturity profile and increasingly sustainable growth prospects. Pressures and risks remain, as evidenced by persistent revenue challenges, a potential repeat of pre-election fiscal cycles, and the emergence of significant arrears and further contingent liabilities in the energy sector, all contributing to rising public debt. The positive outlook reflects increasing confidence that the government will manage those pressures in such a way as to sustain and enhance external and fiscal stability.
The decision to affirm the B3 rating balances, for now, those positive medium-term trends and existing challenges. A key constraint on the rating is the country's significant exposure to international capital flow reversals, which tend to coincide with exchange rate volatility and rising external and domestic borrowing costs, putting pressure on already weak debt affordability. Measures which reduce that exposure by demonstrating reliable liquidity risk management and increasingly firm control over the debt position would support an upgrade to a B2 rating. However, those measures will take time to evidence impact. As a consequence, the outlook is unlikely to be resolved quickly and may even extend beyond the usual 18 month period in order to monitor how policy unfolds following the forthcoming election, and in particular the government's progress in implementing its energy recovery strategy.
Ghana's foreign- and local-currency bond and deposit ceilings remain unchanged, namely the foreign-currency bond ceiling at B1, the foreign-currency deposit ceiling at Caa1, and the local-currency bond and deposit ceilings at Ba3.
