S&P affirms Ghana’s “B-/B” credit ratings with stable outlook

Standard & Poor's (S&P) Global has maintained Ghana's credit ratings at "B-/B" for both long-term and short-term foreign and local currency obligations. The agency also reaffirmed its outlook as stable. S&P explained that a "B-/B" rating indicates high credit risk and a likelihood of default in adverse economic conditions. This assessment is based on Ghana's expanding gold sector positively impacting its external metrics, as well as the economy's relative resilience to external shocks like the Middle East conflict.

Additionally, the ratings agency considered the country's ongoing fiscal reforms, which are being supported by a new IMF-funded policy coordination instrument. However, S&P expressed concerns about the Bank of Ghana's weakened financial position due to the government's rapid accumulation of foreign currency reserves through gold exports.

This approach requires substantial recapitalization, and the fiscal costs of the Ghana Gold Board are projected to remain high. The agency also highlighted potential challenges in Ghana's fiscal management, including elevated costs associated with public debt, contingent liabilities from state-owned entities and the central bank, implementation risks, and the country's sensitivity to commodity price fluctuations, particularly in gold, cocoa, and oil.

S&P cautioned that it may downgrade Ghana's ratings within the next 12-18 months if the government struggles to refinance maturing debt due to rising deficits, deteriorating performance at financial institutions, or unexpectedly high public debt or debt service costs. Furthermore, a downgrade could occur if there are materially lower-than-anticipated gold, cocoa, or oil export volumes, leading to increased external financing needs and indebtedness.

Although this scenario is not the base case, S&P warned that the debt restructuring process could be stalled if creditors disagree on the comparability of treatment principles and the terms they receive under the G20 Common Framework restructuring process.