Fitch to Assign Rating to Ghana’s Long-Term Local-Currency Issuer Default Rating Post Debt Restructuring with Private Creditors

Fitch Ratings has indicated it will assign a Long-Term Local-Currency (LTLC) Issuer Default Rating (IDR) to Ghana, contingent upon the country reaching an agreement with private creditors on the restructuring of its foreign currency-denominated external debt and the successful completion of that process.

This rating, Fitch asserts, will be underpinned by a forward-looking assessment of Ghana’s willingness and capacity to meet its foreign-currency debt obligations.

In its recent assessment, Fitch affirmed Ghana’s status at ‘Restrictive Default’ (RD). An upgrade of the LTLC IDR is anticipated once liquidity pressures ease, potentially following the external debt treatment’s conclusion.

Fitch highlighted that reestablishing macroeconomic stability would significantly reduce debt interest costs.

According to Fitch’s proprietary Sovereign Rating Model, Ghana currently holds a score corresponding to a ‘B-‘ rating on the Long-Term Foreign-Currency IDR scale. However, Fitch’s sovereign rating committee has opted not to utilise the SRM and Qualitative Overlay in explicating these ratings.

Ghana’s Country Ceiling has been rated at ‘B-‘. For sovereigns rated ‘CCC+’ and below, Fitch uses a baseline of ‘CCC+’ to determine the Country Ceiling.

The Country Ceiling Model initially produced a starting point of +0 notch above the IDR. Nevertheless, Fitch’s rating committee applied a +1-notch qualitative adjustment under the Balance of Payments Restrictions pillar.

The ‘B-‘ Country Ceiling reflects that the private sector in Ghana has not faced significant impediments in converting local currency into foreign currency and transferring the proceeds to non-resident creditors to service debt payments.

Source: Norvanreports