Ghana -First HIPC Nation To Access International Capital market
Fitch Ratings said it will assign Ghana's forthcoming sovereign bond a 'B+' rating, in line with the country's 'B+' long-term foreign currency issuer default rating, which has positive outlook.
With this sovereign bond issue, Ghana becomes the first post-HIPC (heavily indebted poor countries) debt relief candidate to access international capital markets.
Real GDP growth exceeded 6 pct in 2006, notwithstanding severe energy shortages, while single digit inflation is near at hand and structural reforms are edging ahead, Fitch noted.
However, 'a sharp rise in the fiscal deficit to 7 pct of GDP in 2006 from 2 pct in 2005 undermined a promising track record of fiscal consolidation, highlighting the fact that Ghana's recent gains in sovereign creditworthiness remain fragile and potentially reversible,' said Paul Rawkins, a senior director at Fitch.
Negotiating voluntary International Monetary Fund policy support instruments could help to instil greater investor confidence, even more so as elections start to loom towards the end of 2008 and aid inflows stabilise at around 7 pct of GDP following their 2003-05 peak, Fitch added.
'Debt relief has given Ghana a head start; the challenge now is to build on this advantage and turn macroeconomic stability into higher growth and prosperity, without compromising sovereign creditworthiness,' Rawkins added.
Signs that fiscal discipline remains on a downward slope could invite negative rating actions. However, more compelling evidence that the government is re-applying fiscal discipline and pushing ahead with structural reforms could be treated favourably, the ratings agency said.