International rating agency, Fitch, reports that Ghana's public debt-to-Gross Domestic Product (GDP) ratio decreased by only one percentage point, despite significant efforts to reduce the country's debt.
Fitch assessed the ratio using the standard 5% discount rates applied in the International Monetary Fund/World Bank debt sustainability framework for low-income countries.
According to Fitch, the domestic debt exchange has increased the debt-to-GDP ratio by 0.6 percentage points. This is due to payment-in-kind coupons that correspond to an increase in the face value of new bonds compared to the face value of tendered bonds.
Fitch also stated that the International Monetary Fund's (IMF) support for Ghana depends on the government's ability to demonstrate a clear path to reduce the present value of debt to 55% of GDP over the forecast horizon, as per the IMF/World Bank debt sustainability analysis.
However, this support also depends on the ability of official bilateral creditors to provide financing assurances in the context of the Common Framework external debt restructuring requested by Ghanaian authorities.
While discussions have begun among some official creditors, Fitch emphasized that the official creditor committee responsible for providing financing assurances has not yet been created.
Therefore, Fitch does not expect financing assurances to be provided before the end of the second quarter of 2023.
This could pave the way for an IMF Board approval of the Extended Credit Facility (ECF) arrangement and for a new debt sustainability analysis to be published.
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