S&P: CCC+ rating better represents Ghana's creditworthiness

S&P Global Ratings has upgraded Ghana's foreign currency sovereign credit ratings to CCC+ from selective default, with a stable outlook. The rating agency expressed optimism about Ghana's creditworthiness, citing progress in stabilizing public finances and reducing debt service burdens. Ravi Bhatia, Director and Lead Analyst at S&P, highlighted the factors that led to this upgrade and discussed the sustainability of these improvements. Bhatia mentioned that Ghana defaulted in December 2022 but quickly engaged in restructuring talks. By October 2024, they restructured their Eurobonds, leading S&P to move them from default to CCC+. Further progress was made in dealing with commercial bank loans, prompting S&P to upgrade the entire issuer credit rating to CCC+. The economy has shown resilience with strong growth, supported by favorable gold prices. However, fiscal pressures emerged due to arrears accumulated around the election period, which Ghana is addressing with IMF support. Bhatia emphasized the importance of fiscal consolidation to maintain the current rating and potentially achieve further upgrades. Negotiations with commercial creditors are crucial, with Ghana offering a good faith settlement expected to be accepted by the majority of banks. S&P stressed the need for continued negotiations and progress on the economy and fiscal consolidation. Despite the upgrade, Ghana still faces high debt service burdens from significant arrears and commitments. Bhatia highlighted the importance of running primary surpluses to reduce debt levels and improve credit outlook. On a positive note, Ghana has been experiencing a current account surplus and currency appreciation. Structural improvements in the export sector, supported by strong gold prices, have been promising. Challenges remain in the cocoa sector due to artisanal mining impacting production. Overall, Ghana's economic prospects look favorable, but sustained efforts in structural reforms and growth are essential for fiscal stability and debt reduction. The recent rating upgrade reflects progress made by Ghana in addressing its economic challenges and the potential for further improvements in creditworthiness. S&P's outlook signals confidence in Ghana's commitment to fiscal discipline and economic growth, paving the way for a more stable and resilient financial future.