Rating agency, Fitch maintains Ghana’s ‘B’ rating with a stable outlook

The global rating agency, Fitch, has affirmed Ghana's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'B' which is two levels below investment grade.

A plaque is pictured at the entrance of the Fitch offices in downtown Milan January 24, 2012.  REUTERS/Alessandro Garofalo

According to the US firm the reason for the rating is because Ghana has strong medium-term growth potential and strong governance indicators relative to peers; balance against worsening external liquidity, a weak banking sector, and high debt levels.

Fitch said Ghana has been “unable to significantly raise domestic revenue through tax administration reforms and adjustments. Moreover, the country's record of sizeable fiscal slippages in the election years of 2012 and 2016, implies there are downside risks ahead of the 2020 general elections”.

Fitch also forecasted that “government debt will fall in 2019, to 58% of GDP, but high debt servicing costs and currency depreciation will keep debt above 50% of GDP in the medium term”.

This is coming at a time when the government is beginning a roadshow to the issuance of a US$3 billion Eurobond to shore up revenue for budget expenditure and payment of maturing notes.

Meanwhile, the government is expected to use the notes as a stopgap measure for the weakening Ghana Cedi, which strengthened by 0.2 percent to 5.6452 per the US Dollar, the first weekly gain since 15 February 2019.

In a related development, Standards and Poor's (S&P) Global, another rating agency, also maintained its 'B/B' long and short-term foreign and local sovereign credit ratings for Ghana, a few days before the Fitch release. 

According to S&P, its rating is due to the pressure on public finances, with interest payments representing over 30% of government revenues.

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