Rating Agency Moody, has changed Ghana’s long term issuer and senior unsecured bond ratings from stable to positive.
The Agency has concurrently affirmed the rating of the bond enhanced by a partial guarantee from the International Development Association IDA, 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.
Moody says reforms implemented under the recent IMF Programme are beginning to bear fruit.
It cited 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, which all contribute to the 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 agency says 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 according to Moody 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 government’s progress in implementing its energy recovery strategy.
Ghana’s foreign-and local-currency bond and deposit ceilings remain unchanged.