Fitch, the rating agency, forecasts that Ghana’s public debt will decrease to 87% of Gross Domestic Product (GDP) by the close of 2023, down from 89% in 2022.
Fitch had previously projected that Ghana’s gross public debt for 2023 would amount to 99% of GDP.
This reduction will primarily be influenced by the 50% debt reduction agreed upon for the Bank of Ghana’s (BoG) nonmarketable debt holdings, equivalent to 4.2% of the estimated 2023 Gross Domestic Product.
Fitch anticipates that this decline will be somewhat offset by a 33% year-on-year depreciation of the cedi, as compared to the end of 2022, and the primary deficit.
“Assuming a 30% haircut on external debt considered for the restructuring, year-on-year cedi depreciation of 20% in 2024 and 9% in 2025 and a GDP deflator of 21% and 10% respectively, public debt would fall to 78% by 2025, although there is a high degree of uncertainty surrounding the definitive external debt restructuring parameters”, it added.
Under the IMF program, Ghana has pledged to carry out a primary fiscal adjustment, based on commitments, amounting to 5.1 percentage points of GDP by 2026 when compared to the levels in 2022.
Fitch estimates that the primary fiscal adjustment will reach 3.1 percentage points in 2023, leading to a decrease in the primary deficit from 3.7% in 2022 to 0.6% of GDP. This reduction is expected to be driven by cutbacks in capital expenditure, the wage bill, and other current expenditure, including transfers to the energy and financial sectors.