Fitch Ratings has enumerated factors that could, individually or collectively, lead to negative rating action or downgrade for the country following the upgraded credit rating to B- and a stable outlook.
The factors include renewed liquidity pressures, due for example to smaller fiscal consolidation or the materialisation of contingent liabilities that would undermine the sovereign’s ability to repay debt obligations.
Similarly, a lower confidence in the capacity of the sovereign to refinance the maturities that come due in the short to medium term, citing an inability to reopen the local-currency bond market.
The UK-based firm also mentioned external liquidity pressures, including a fall in international reserves due, for example, to current account deficits.
On factors that could, individually or collectively, lead to positive rating action or downgrade for Ghana, it cited a sustained decline in debt/Gross Domestic Product (GDP) that is underpinned by strong implementation of a credible medium-term fiscal consolidation strategy.
It also mentioned a sustained build-up in international reserves closer to the ‘B’ median that would underpin macroeconomic stability and contribute to greater confidence in the ability of the government to repay debt obligations.
Fitch said the country ceiling for Ghana of ‘B-‘ is in line with the Long-Term Foreign Currency Issuer Default Rating (IDR).
According to the rating agency, this reflects no material constraints and incentives, relative to the IDR, against capital or exchange rate controls being imposed that would prevent or significantly impede the private sector from converting local currency into foreign currency and transferring the proceeds to non-resident creditors to service debt payments.
Ghana had an ESG Relevance Score of ‘5’ for Political Stability and Rights. “As Ghana has a percentile rank below 50 for the respective Governance Indicator, this has a negative impact on the credit profile”, it however, stated.
Ghana had an ESG Relevance Score of ‘4’ for Creditor Rights as Fitch stated that the willingness to service and repay debt is relevant to the rating and is a rating driver for Ghana, as for all sovereigns.
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