Government would ultimately opt for financial support from the International Monetary Fund if liquidity or cash constrains grows, Fitch Ratings has stated.

“The government has so far chosen not to pursue a regular IMF programme. However, we believe the authorities would ultimately opt to seek IMF financing if liquidity strains mount. The IMF classifies Ghana as being at high risk of debt distress, but we do not believe that an IMF programme would entail a debt restructuring.”

Some economists and finance professionals have already predicted that the country will eventually seek financial support from the IMF to help address challenges within the fiscal economy.

According to Fitch, the Bretton Wood institution’s support would bolster investor confidence, and could help the country regain access to international debt markets. 

However it said “the government’s current fiscal consolidation strategy offers a path to debt sustainability, but the gradual pace of deficit reduction leaves it vulnerable to slippage risk. This was reflected by our revision of the Outlook on the sovereign rating to negative, from Stable, when we affirmed the rating at ‘B’ in June 2021.”

“An insufficient pace of consolidation, failing to rebuild investor confidence, could result in a downgrade of the sovereign rating”, it added.

It further said macroeconomic stresses and pressures on liquidity would probably intensify if Ghana remains unable to issue and does not seek timely support from the IMF.

“Around 20% of local-currency sovereign debt is held by non-residents, and under such a scenario these investors could lose confidence and sell down their holdings. This could put downward pressure on the currency and force up the government’s borrowing costs”, it stressed.

In June, 2021, Fitch Ratings, said a prolonged lack of market access leading to a sustained, sharp depreciation of the cedi or a decline in international reserves could be a driver of negative rating action.