July 26, 2013 / 3:41 PM / in 4 years

Fitch Rates Ghana's USD Bond 'B+'

LONDON, July 26 (Fitch) Fitch Ratings has assigned Ghana's new USD bond issue a 'B+' rating. The rating is in line with Ghana's 'B+' Long-term foreign currency Issuer Default Rating, on which the Outlook is Negative. Fitch affirmed Ghana's ratings on 15 February 2013 (see 'Fitch Revises Ghana's Outlook to Negative; Affirms at 'B+''). This second Ghana sovereign Eurobond is a 10-year USD750m issue with a coupon of 7.875% KEY RATING DRIVERS Ghana's ratings are supported by its robust economic performance as well as a strong growth outlook. This will be boosted by rising oil production, as well as the wider benefits for the broader economy from the development of the oil sector. Infrastructure spending, which is needed to reduce bottlenecks, will also underpin growth. Measures of governance and the business environment are above both the 'B' and 'BB' medians. The Negative Outlook reflects the worsening trend in public finances. During 2012 the fiscal deficit widened to 12.1% of GDP in the run up to the December election. The rapid deterioration over and above official projections suggests a serious loss of fiscal control and further reduced the credibility of fiscal policy against an already weak track record. The authorities aim to reduce the deficit to 9% of GDP in the current fiscal year, but upside risks remain including persistently high bond yields, continued arrears build-up as well as weak expenditure control. As a result of the worse-than-expected fiscal outturn, government debt has risen to 49.4% of GDP in 2012, up from 31% of GDP at the time of the 2008 elections and above similarly rated countries ('B' category median 38.9% of GDP) despite strong growth and high commodity prices. The blow-out in the budget deficit has contributed towards a widening in Ghana's current account deficit, placing Ghana in a more vulnerable position. The current account deficit has widened to 12.3% of GDP in 2012, up from 8.6% in 2011. The deficit is expected to remain above 10% in 2013 placing continued pressure on the currency as well as international reserves. The cedi has fallen by 6% against the dollar since the start of the year, while international reserves have declined to 2.9 months of import cover Lower per capita income and human development compared to the 'B' median also constrain the rating. RATING SENSITIVITIES Failure to set out and implement a credible fiscal consolidation plan as well as improve expenditure control would put downward pressure on the rating. A material increase in external vulnerability related to the large current account deficit, such as declining or volatile capital inflows and falling reserve cover would also be negative for the rating. Over the medium term, the new oil and gas sector has the potential to boost Ghana's economic output, diversify the economy and strengthen the country's public and external balance sheets. All these factors should eventually strengthen Ghana's creditworthiness. KEY ASSUMPTIONS Fitch assumes the budget outturn will be broadly in line with the government's commitment to reduce the deficit to 9% of GDP in 2013 and 6% in 2014, reflecting a combination of real expenditure restraint, particularly on current expenditure, as well as continuing robust revenue growth. Fitch assumes Ghana's GDP growth remains robust, in excess of 7%. Growth prospects will depend on oil production coming on stream as anticipated, increasing to 120,000b/d in 2013 and to 600,000 by 2018; the continued development of the gold sector; and further investment in infrastructure. On this basis, key debt ratios are eventually expected to stabilise around current levels. Favourable growth forecasts and a sustainable external position assume favourable terms of trade with no sustained deep fall in commodity prices, particularly gold, cocoa and oil which together make up 83% of exports. Contact: Primary Analyst Carmen Altenkirch Director +44 20 3530 1511 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Richard Fox Senior Director +44 20 3530 1444 Committee Chairperson Edward Parker Managing Director +44 20 3530 1176 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, 'Sovereign Rating Methodology' dated August 2012 are available at www.fitchratings.com. Applicable Criteria andALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below