Another round of domestic debt restructuring unlikely

On November 1, 2023, 8:50 PM

Rating agency, Fitch, says another round of local-currency debt exchange is unlikely in the near term.

In its latest assessment of Ghana where it upgraded Ghana’s credit rating to ‘CCC’ from Restrictive Default, the UK-based rating agency said the local-currency debt exchanges represent a debt service reduction of ¢52 billion in 2023, about 6% of estimated 2023 Gross Domestic Product or 39% of estimated 2023 revenue and grants.

According to the International Monetary Fund, a debt service represented 117% of revenue in 2022. Of this total debt service reduction, it estimated the interest payment reduction in 2023 amounts to 1.8% of GDP or 12% of revenue and grants.

Fitch also said the domestic US dollar-denominated debt exchange has added another ¢5 billion (0.6% of GDP, 4% of revenue and grants) debt service reduction in 2023, and a further reduction is coming from the 50% principal haircut agreed with Bank of Ghana on its holdings of ¢71 billion local-currency nonmarketable debt.

These debt exchanges, it stressed, have brought down interest payments to a still high 38% of revenue and grants in 2023, from 47% in 2022 (commitment basis, including interest payments that are due in 2023 on external debt), adding, “Fitch considers another round of local-currency debt exchange as
unlikely in the near term”.

Fitch also assigned ‘CCC’ issue ratings to two interest-only bonds that were issued to pension funds and to four domestic US dollar-denominated bonds, all issued as part of the domestic debt exchanges.

Fitch has also affirmed the ‘CCC’ issue rating on local-currency bonds that it assigned on March 22, 2023.

In August, Ghana made timely first coupon payments on these “new” bonds.

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