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 the long-term and short-term foreign currency debt, as well as the local currency rating. The agency has also kept its outlook on Ghana's credit situation as "stable". The "B-/B" rating is considered non-investment grade, signifying that the country poses a high credit risk and is likely to struggle with debt repayment during economic downturns.

According to S&P, the current rating reflects the positive impact of the expanding gold sector on Ghana's external metrics, as well as the economy's relative resilience amidst the geopolitical tensions in the Middle East. The agency also noted that fiscal reforms, supported by a 36-month, unfunded policy coordination instrument from the International Monetary Fund, are progressing.

However, S&P expressed concerns over the weakened financial position of Ghana's central bank, primarily due to the government's aggressive accumulation of foreign currency reserves through gold exports. This strategy, S&P suggests, necessitates significant recapitalization. Additionally, the agency highlighted that the fiscal costs of the Ghana Gold Board (GoldBod) are expected to stay elevated.

Looking ahead, S&P warned that it may downgrade Ghana's credit rating within the next 12-18 months if the government encounters difficulties in refinancing its maturing debt due to factors such as rising deficits, poor performance at the Bank of Ghana or state-owned entities like GoldBod, or unexpectedly high public debt and debt service costs.

Furthermore, S&P stated that the rating could be lowered if terms of trade or export volumes deteriorate, leading to increased external financing needs and external indebtedness for Ghana. The ratings agency also expressed a concern that the debt restructuring process could stall if Ghana's creditors disagree on comparability-of-treatment principles and the corresponding terms they receive under the G20 Common Framework restructuring process.