Fitch Solutions, a multinational rating agency, says it anticipates Ghana’s debt to decline to 87 per cent of gross domestic product (GDP) at the end of 2023 in contrast to 89 per cent to GDP in 2022.
The reduction, according to Fitch, was due to the 50 per cent haircut on the Bank of Ghana’s holdings of non-marketable debt, which represented a debt reduction of 4.2 per cent of the estimated 2023 GDP.
The reduction was disclosed in a recent report that assessed the credit worthiness of Ghana.
The rating agency said it expected that the reduction in public debts would partly offset the 33 percent year-on-year cedi depreciation compared with the same figure by end of 2022 and the primary deficit.
Fitch expects a further reduction in Ghana’s debts for the 2024 and 2025 financial years.
The rating agency based its projections on the debt reduction for 2024 and 2025 on a proposed 30 per cent haircut on external debt considered for restructuring, year-on-year cedi depreciation of 20 per cent in 2024 and 9 per cent in 2025, and a GDP deflator of 21 per cent and 10 per cent respectively.
The rating agency said public debt would fall by 78% by 2025; however, it emphasised that there was a high degree of doubt surrounding the conclusiveness of external debt restructuring due to constraints.
Fitch said Ghana’s current account would reach surplus status owing to the non-payment of interest on selected external debt pending a restructuring and a noticeable decrease in merchandise imports.
It said that depending on the success of external debt restructuring, the current account could remain surplus in 2024 and 2025.
According to its forecast, the 2024 surplus could reach 1.2 percent of GDP, in contrast to 1.8 percent in 2025.
The rating agency said the Central Bank’s international reserve would increase by $1.1 billion per year in 2023–2025 due to current account surpluses and projected disbursements from international financial institutions.