Moody's Investors Service has today changed the outlook on Ghana's B1 government bond rating to negative from stable. Concurrently, Moody's has affirmed the government's B1 issuer and bond ratings.
The key drivers of today's rating action are the following :
- The Ghanaian government's weak fiscal fundamentals and rising debt levels, which reflect both continued spending overruns and relatively low revenue ratios compared with rating peers, despite rapid growth.
- The weakening of Ghana's external position on the back of large external imbalances and a low level of foreign-exchange reserves, which have increased the country's susceptibility to event risk in view of the strong correlation between domestic economic activity and the global business and commodity cycles.
A return to a stable outlook on Ghana's sovereign ratings could develop as a result of (1) accelerated and sustained fiscal consolidation that would gradually reduce the government's debt burden over the medium term; (2) a substantial bolstering of Ghana's foreign-exchange and/or fiscal reserves that would reduce the country's vulnerability to domestic or external shocks; (3) a strengthening of FDI inflows as a source of funding for the country's external imbalance.
