Ghana: Fitch Ratings anticipates country’s successful exit from default in 2024

In its 2024 Regional Sub-Saharan African Sovereigns Outlook, Fitch Ratings projects a positive trajectory for Ghana and Zambia, anticipating a successful emergence from default on their foreign-currency debt.

The UK-based agency underscores the pivotal role of gradual fiscal consolidation in these nations, citing financing constraints and ongoing fiscal reforms, intricately tied to International Monetary Fund (IMF) programs.

Fitch emphasizes the significance of IMF programs in the debt restructuring processes under the Common Framework for both Ghana and Zambia, cautioning about potential delays that could impact the optimistic outlook.

“We forecast gradual fiscal consolidation due to financing constraints and fiscal reform efforts, which, in many cases, are linked to IMF [International Monetary Fund] programmes. This consolidation will help government debt/GDP to broadly stabilise”.

“We expect Ghana and Zambia to emerge from default on their foreign-currency debt in 2024, although, in both cases, the debt restructuring process under the Common Framework is vulnerable to further delays”, stated the rating agency.

The agency further highlights the delicate balance these nations navigate in accessing international capital markets without credit enhancements, signaling persistent challenges.

In the report, multilateral funding, particularly from the IMF, is identified as a linchpin for the Sub-Saharan African region, acknowledging its crucial role in supporting economic stability. However, Fitch tempers the positive outlook by acknowledging the prevailing risks that continue to pose a downside threat.

Fitch notes that it anticipates a stable median real GDP growth and a dip in average inflation in the region, albeit with a caveat that inflation remains elevated in several sovereigns. The report underscores the enduring financing challenges faced by the region, underscoring the indispensable role of multilateral funding while acknowledging potential risks in the economic outlook.