The issue ratings on local-currency bonds issued domestically that have not matured yet have also been upgraded to 'CCC' from 'D'.

However, Fitch has affirmed Ghana's Long-Term Foreign-Currency IDR at 'RD'. Fitch typically does not assign Outlooks to sovereigns with a rating of 'CCC+' or below.

The upgrade of the ratings on Ghana's Local-Currency (LC) denominated debt follows the completion, effective February 21, 2023, of the domestic debt exchange programme by the Republic of Ghana. 

Fitch viewed this transaction as a distressed debt exchange in a context of heightened fiscal pressures, with interest costs amounting to 54% of revenues in 1H22, and lack of access to international capital markets.

Fitch estimates that the domestic debt exchange allows Ghana to reduce its interest payments in 2023 by around 10% of expected revenues, or 1.6% of GDP.

Gross financing needs this year have been reduced by 5% of 2023 GDP. In 2024, interest payments would be lowered by 6% of revenues, or 0.9% of GDP. 

According to Fitch's forecasts, the domestic debt restructuring together with the suspension of external debt service, significantly reduces Ghana's cash fiscal deficit in 2023 to 4.5% of GDP in 2023.

However, solvency concerns remain critical as the domestic debt exchange has increased the debt-to-GDP ratio by 0.6pp. 

Fitch estimates the present value of public debt-to-GDP to be slightly above 100% after the completion of the domestic debt exchange.

IMF support for Ghana will likely depend on the government's ability to show a path towards bringing the present value of debt to 55% of GDP over the forecast horizon on the basis of the IMF/World Bank debt sustainability analysis and the ability of official bilateral creditors to provide financing assurances in the context of the Common Framework external debt restructuring that authorities have requested.

Despite the materialisation of increased confidence on the LC debt market following the completion of the domestic debt restructuring, with yields on 91-day T-bills reaching 18.5% in March 2023 after 35.7% in February 2023, Fitch expects yields on T-bill auctions to remain elevated as inflation remains above 50% year-on-year. 

Although the suspension of debt service lowers the current account deficit, which Fitch forecasts at 2.8% of GDP in 2023 after 4.1% in 2022, lack of access to international capital market will continue to weigh on reserves, but more moderately than in 2022.