This is why S&P Global Ratings upgraded Ghana’s credit rating

The agency maintained a stable outlook for Ghana’s foreign and local currency ratings, highlighting “supportive economic growth, ongoing fiscal reforms, and improved external position” as key factors.

However, it cautioned that high debt servicing costs and weak public financial management during election cycles remain risks.

“The upgrade reflects authorities’ recent steps to restructure remaining commercial debt,” S&P stated. “We understand the government is nearing completion of its offers to restructure loans to external creditors, primarily commercial banks.”

Economic recovery and challenges

Ghana’s external metrics have strengthened, with gold export earnings rising by 53.2 per cent in 2024 and foreign exchange reserves recovering to nearly $4.6 billion. Inflation, though still high at 21.2 per cent, is declining due to a stronger cedi and energy prices.

Yet, challenges persist. S&P noted that Ghana’s debt sustainability remains vulnerable to exchange rate fluctuations, with external debt making up 62 per cent of government liabilities. Tax administration weaknesses and spending overruns, particularly in election years, also pose fiscal risks.

Mahama’s reform agenda
Since taking office, President Mahama’s government has prioritised expenditure cuts, IMF-backed fiscal reforms, and legislative changes, including amendments to the Public Financial Management Act. The administration has also committed to clearing arrears uncovered after the 2024 elections, though an official audit is still underway.

S&P acknowledged Ghana’s resilient growth—5.7 per cent in 2024—driven by industrial and services sector rebounds. However, it warned that cocoa production faces long-term threats from illegal gold mining, which degrades farmland and diverts labour.

Future risks and opportunities
While the stable outlook suggests cautious optimism, S&P warned that ratings could be downgraded if fiscal discipline weakens or debt servicing pressures rise. Conversely, faster reserve accumulation or stronger public finance management could lead to further upgrades.

The upgrade marks a milestone for Ghana’s economic recovery, but as S&P noted, “the road ahead remains fraught with challenges.”