Adnan Adams Mohammed
All things being equal, the finance minister is to present the 2024 Mid-Year Budget Review to Parliament tomorrow, Tuesday, 23 July 2024.
This presentation will provide updates on the implementation of the 2024 Budget and insights into the country’s economic and fiscal performance for the first half of the year.
“The budget review is necessary for introduction of new measures to rejuvenate the economy”, Dr. Mohammed Amin Adam, the Minister for Finance, has said.
Majority Chief Whip Frank Annoh-Dompreh announced the upcoming presentation while presenting the Business Statement for the week to the House.
“Hon members, the Minister of Finance is expected to present the Mid-Year Review of the Budget Statement on Economic Policy of the government for the 2024 financial year on Tuesday, July 23,” he stated.
This mid-year review is highly anticipated as it will shed light on the government’s progress in executing its economic policies and managing fiscal resources.
It will also outline any necessary adjustments to ensure the country’s financial stability and growth for the remainder of the year.
Already, Ghana’s economy is being touted by the World Bank in its latest Country Policy and Institutional Assessment (CPIA) report and the Moody’s, and international rating agency.
Moody’s recently hinted that Ghana’s economy is likely to witness credit ratings upgrade after it successfully restructured its Eurobonds.
Currently, Ghana’s rating stands at Caa3 for local currency and Ca for foreign currency. These ratings reflect the government’s ongoing debt restructuring efforts under the G20 common framework, initiated in December 2022.
Moody’s, in a recent report stated that, once the restructuring is complete, all ratings are likely to be aligned at a higher level, though still within the Caa-rating category due to liquidity constraints typically following a default event. The IMF program supports fiscal consolidation and funding access, benefiting from Ghana’s relatively robust institutional capacity.
“..However, high inflation and tight monetary conditions remain key credit challenges”, New York-based ratings agency has said.
The restructuring of local currency debt, excluding Treasury Bills, was completed in 2023. Regarding foreign currency debt, which constitutes nearly half of Ghana’s total debt, significant progress has been made.
Last month, Ghana’s Ministry of Finance announced an agreement in principle with bondholders to restructure $13.1 billion of Eurobond debt, which accounted for 21% of Ghana’s total debt in 2023. Under this agreement, bondholders would forgo around $4.7 billion in principal without state-contingent triggers. This followed a June 12 MoU between the Finance Ministry and the Official Creditor Committee (OCC) to restructure $5.4 billion of official sector external debt. The IMF confirmed on June 28 that both restructurings are consistent with its program parameters, though the OCC has yet to confirm that the bondholder agreement is comparable in debt treatment to the MoU.
Moody’s assesses Ghana’s economic strength at ‘ba2’, balancing the country’s growth potential in the oil and non-oil sectors against its small size and low wealth levels. The ‘caa2’ rating for institutions and governance strength reflects very weak fiscal and monetary policy effectiveness, which led to unsustainable government debt and the need for restructuring.
Ghana’s fiscal strength is rated ‘ca’, indicating very weak debt affordability and a very high debt burden. The ongoing debt restructuring is expected to improve these metrics. Moody’s also highlighted Ghana’s susceptibility to event risk at ‘ca’, driven by elevated government liquidity risk due to high gross borrowing requirements and limited borrowing options.
The outlook for Ghana remains stable, reflecting the ongoing foreign currency debt restructuring. Expected losses for bondholders align with the current ratings’ loss-given-default range. Moody’s indicated that a rating downgrade is unlikely, given the recent progress on foreign currency debt restructuring and the agreement’s terms with bondholders.
However, if the agreement does not proceed, it could derail the debt restructuring process, potentially leading to downward pressure on both local and foreign currency ratings. Moody’s emphasized that they will likely upgrade the local and foreign currency ratings following the exchange of the Eurobonds.
The June 24 agreement provides substantial debt relief to the government, complementing earlier local currency debt restructuring. The restructuring of official sector debt will bring additional, yet unknown, liquidity relief. Post-restructuring, Ghana’s ratings are likely to be higher, though still reflecting liquidity constraints.
