Credit rating agency Fitch anticipates Ghana's public sector debt to increase to 99% of Gross Domestic Debt by the end of 2023, up from 88% in 2022.

The primary driver for this projected rise is the depreciation of the cedi against the US dollar, with the local currency having already lost about 11.80% in value to the dollar on the retail market and 22% on the interbank market.

Fitch suggests that without a Common Framework restructuring, public sector debt could decline to 95% of GDP in 2024 and further to 94% in 2025. 

This reduction is contingent on continued fiscal consolidation and stabilisation of the cedi.

Contrary to Fitch's projection, the International Monetary Fund (IMF) had previously projected a decline in Ghana’s debt-to-GDP ratio for 2023 to 84.9% from 92.4% in 2022.

The October 2023 Fiscal Monitor indicated an expected consistent decline in the country's total debt-to-GDP ratio over the next five years.

Ghana faced challenges in its public finances last year, leading to restricted access to Eurobond markets and a significant decline in external liquidity. 

This resulted in credit downgrades, including a downgrade to ‘CCC’ by Fitch and subsequent placement on restricted default (‘RD’) in early 2023.

Despite the downgrades, Fitch notes that foreign-currency debt constitutes less than 40% of Ghana’s total public debt, well below the ‘B’ median. 

The agency acknowledges Ghana's stronger levels of governance compared to the ‘B’ median and its democratic record with peaceful transitions of power since 1992.

However, Fitch expresses concerns about the country's weaknesses, including a low international liquidity position, low per-capita income and human development indicators, and a heavy reliance on exports of oil, gold, and cocoa, exposing it to commodity price volatility.