Fitch Raises Outlook On Ghana To Stable As Economy Stabilizes

Fitch Ratings raised its outlook on Ghana's speculative-grade credit ratings on a stabilizing economy and in anticipation of increased oil production later this year.

Veronica Kalema of Fitch said tight fiscal and monetary policy, as well as use of funding from the International Monetary Fund, has stabilized the African nation's economy.

Meanwhile, inflation declined to a single-digit percentage in June for the first time since 2006 as Ghana's current account deficit narrowed to 8% of gross domestic product last year from 21% a year earlier and its budget gap shrank to 10% from a peak of 14.5% in 2008. The declining inflation rate has eased the government's cost of borrowing, Fitch said.

The outlook change comes as the nation has reached accords to bring more investment into Ghana.

It and China on Wednesday signed project loans and another deal totaling $15 billion, the latest in a string of Chinese investments in Africa. On Wednesday, the China Export Import Bank and the government of Ghana signed a $10.4 billion concessionary-loan agreement for various infrastructure projects, payable over 20 years, the government of Ghana said on its website. A separate loan of $3 billion, from the China Development Bank, is slated for Ghana's burgeoning oil-and-gas sector.

Ghana has one of the highest debt levels among single-B rated countries at more than 60% of GDP. While the government's fiscal consolidation has been slower this year than 2009 as it pays off debt, Fitch expects the inherited arrears to be cleared by 2012.

Still Fitch said Ghana's ratings could face downward pressure if the government returns to "fiscal mismanagement." Any upgrade would depend on continuing commitment to completing a revamp of public finances. The ratings agency has Ghana's long-term issuer default ratings at B+, four steps into junk territory.

Standard & Poor's Ratings Services last month downgraded Ghana to B, a level lower than Fitch, citing its large fiscal deficit and other factors.