Ghana expected to conclude external debt restructuring by June – Fitch Ratings

In a comprehensive assessment of Ghana’s economic outlook, rating agency Fitch Ratings forecasts the conclusion of the nation’s external debt restructuring by June 2024.

The rating agency indicates that Ghana is poised to finalize its debt restructuring program with Eurobond holders within the projected timeline, provided current conditions persist.

Having already secured an agreement with bilateral creditors in January, Ghana is now set to negotiate the terms of restructuring with commercial creditors, a process expected to conclude by the latter half of 2024.

Fitch’s evaluation underscores the limited impact of the debt restructuring terms with Ghana’s official creditors on the banking sector. With banks maintaining minimal exposure to Eurobonds and likely having preemptively accounted for impairments, the overall sector remains relatively insulated from significant financial strain.

Despite acknowledging potential risks to banks’ loan quality due to macroeconomic fallout from sovereign default, Fitch emphasizes that the sector’s exposure remains mitigated by the modest scale of the loans involved.

However, the agency underscores the sensitivity of banking sector capitalization to Ghana’s local-currency creditworthiness, given the substantial exposure to government bonds denominated in local currency relative to available capital reserves.

Fitch Ratings’ analysis provides crucial insights into Ghana’s ongoing efforts to address its debt restructuring challenges, underscoring the intricate balance between sovereign debt dynamics and the stability of the domestic banking sector.

As Ghana progresses through its restructuring initiatives, maintaining robust capitalization levels and navigating exposure to local currency creditworthiness will be critical for sustaining financial resilience amidst the evolving economic landscape.