Moody's Investors Service has affirmed the Government of Ghana's long-term issuer and senior unsecured bond ratings at B3. The outlook remains stable. Moody's concurrently affirmed the rating of the bond enhanced by a partial guarantee provided by the International Development Association (IDA, Aaa stable) at B1.
The rating affirmation balances some improving trends (including lower, albeit still elevated, borrowing needs, progress with the restructuring of legacy debts of state-owned power utilities, and benefits to growth and the external accounts from the hydrocarbon production boost following the coming on-stream of the Sankofa oil field and the favorable maritime border dispute ruling by the International Tribunal of the Law of the Sea (ITLOS) last September) against a number of persisting credit challenges (including a high debt burden, weak debt affordability, and weak fiscal institutions reflected in revenue target underperformance and the past accrual of arrears). The B3 rating is based on Moody's expectation that the improved fiscal management codified in the Public Financial Management Act of 2016, and the reforms adopted under the umbrella of the 3-year IMF programme ending in December 2018 will engrain greater spending control through electoral cycles.
The stable rating outlook reflects Moody's view that risks to the B3 rating are balanced. On the upside, stronger growth in the oil- and non-oil sectors and improved balance of payment dynamics could lead to faster fiscal consolidation and a larger build-up of external buffers than Moody's currently expects. On the downside, and pending more visibility about the sustainability of the government's fiscal consolidation and arrears clearance track record, the government's capacity to finance significant borrowing could remain weaker than currently assessed. In particular, while liquidity risk has declined as a result of the government's maturity lengthening strategy, gross borrowing requirements remain relatively elevated at an estimated 12-17% of GDP over the next three years (down from the peak of 23% in 2017).
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.