How Credit Ratings Affect Ghana: Accra Street Journal (ASJ) Intelligence Brief

From borrowing costs to cedi stability — the mechanics of sovereign credit ratings in an emerging economy

Executive Introduction

On 8 May 2026, Fitch Ratings upgraded Ghana’s Long-Term Foreign-Currency Issuer Default Rating from B- to B, with a Positive Outlook . This marked the country’s highest credit rating level since June 2021 and represented a cumulative five-notch recovery from the depths of the 2022 debt crisis . For a nation that suffered multiple downgrades into “junk” territory during its worst economic crisis in decades, the upgrade was a signal that international financial markets were regaining confidence in Ghana’s recovery trajectory .

But what do these ratings actually mean for Ghana? And why should ordinary citizens care about assessments produced by agencies in New York and London?

Sovereign credit ratings are not academic abstractions. They directly affect the interest rates Ghana pays on its debt, the stability of the cedi, the cost of borrowing for Ghanaian businesses, and—ultimately—the fiscal space available for healthcare, education, and infrastructure . When ratings improve, borrowing costs fall; when ratings deteriorate, the entire economy feels the pressure.

This report explains how credit ratings affect Ghana across four critical channels: government borrowing costs, foreign direct investment, exchange rate stability, and domestic credit markets. We analyse the recent upgrade (its drivers, its limitations, and its implications), examine the academic evidence on how rating changes have historically affected the cedi, and assess what further rating actions—positive or negative—could mean for Ghana’s economic trajectory.

The evidence suggests that while Ghana’s rating recovery is real and consequential, it rests on a foundation of expenditure-based fiscal consolidation that has come at significant social cost . Whether this recovery proves sustainable depends on continued reform discipline, global commodity prices, and Ghana’s ability to translate improved ratings into tangible benefits for citizens—not just favourable statistics for international investors.

Part 1: What Sovereign Credit Ratings Actually Measure

The Definition

A sovereign credit rating is an assessment by a credit rating agency (CRA)—such as Fitch, Moody’s, or S&P Global—of a country’s ability and willingness to repay its debt obligations . These assessments are expressed on a standardised scale. For Fitch and S&P, investment grade ranges from AAA down to BBB-, while speculative grade (commonly called “junk” status) ranges from BB+ down to D (default). Moody’s uses a similar but distinct nomenclature, with Baa3 as the lowest investment grade .

Ghana’s current ratings as of May 2026:

Fitch’s B rating indicates that Ghana remains in speculative grade territory—there is still a “high risk of default,” as the agency classifies ratings from BB+ and below . However, the Positive Outlook signals that a further upgrade is possible if current reforms are maintained .

What Ratings Do and Do Not Measure

Credit ratings are not comprehensive economic assessments. They focus narrowly on default risk—the likelihood that a government will miss a debt payment. This explains why Ghana can have strong GDP growth (projected at approximately 5% through 2027) while still carrying a speculative-grade rating . The rating agencies weigh the growth against high debt servicing costs, external vulnerabilities, and historical default events .

As Fitch noted in its May 2026 upgrade announcement, the positive factors—declining debt-to-GDP ratio (a 21 percentage-point drop in 2025), robust GDP growth, cedi appreciation, and rising international reserves—were balanced against persistent concerns including “high debt servicing costs and exposure to external shocks” .

Rating Methodologies: How Agencies Assess Ghana

The major rating agencies evaluate sovereigns using a blend of quantitative and qualitative factors .

Fitch’s methodology analyses economic fundamentals including GDP growth, inflation rates, fiscal deficits, and external balances .

Moody’s places particular emphasis on governance and institutional strength, stating that “a sovereign’s ability to implement sound policies is a critical determinant of its resilience to economic and financial shocks” .

S&P Global focuses on the composition of external liabilities, noting that “whether foreign-currency denominated or local-currency dominated… affects a country’s vulnerability to currency volatility” .

For Ghana, the agencies have historically considered factors including:

• External debt levels and structure (high proportion of foreign-denominated debt amplifies exchange rate risk)

• Foreign exchange reserves adequacy

• Inflation trajectory

• Fiscal discipline (primary surplus performance)

• Political stability

• Commodity price exposure (gold, oil, cocoa)

Part 2: Channel One — Government Borrowing Costs

The most direct and measurable effect of credit ratings is on the interest rates Ghana must pay when it borrows from international capital markets. A higher rating means lower risk perception, which translates into lower yields on bonds and lower interest on loans .

The Mechanism

When Fitch upgraded Ghana from B- to B in May 2026, it signalled to global investors that Ghana’s default risk had decreased. For bondholders, this meant that the risk premium required to hold Ghanaian debt could narrow. The immediate impact was already visible: In April 2026, Ghana returned to the domestic bond market after relying mainly on treasury bills since the Domestic Debt Exchange Programme in 2023, issuing a seven-year bond worth GHS 3.8 billion . The successful issuance demonstrated that investor appetite for Ghanaian debt was recovering alongside the ratings.

The Cost of a Downgrade

The converse is equally powerful—and Ghana experienced it brutally in 2022. Academic research on the relationship between sovereign credit ratings and exchange rates documents that “a country that experiences a downgrade of its credit rating will typically find it more difficult to attract inflows of hard currency,” which in turn puts downward pressure on exchange rates and increases the cost of servicing foreign debt .

Between 2021 and 2022, as Ghana’s economic situation deteriorated, all three rating agencies downgraded the country from the B range (where it had been situated for fifteen years) into the C range—“high-yield junk” territory . By the end of 2022:

• Moody’s rated Ghana at Ca

• Fitch rated Ghana at CC

• S&P rated Ghana at CCC+

These downgrades dramatically increased Ghana’s borrowing costs, accelerated capital outflows, and contributed to a self-reinforcing cycle of currency depreciation and debt distress .

The Interest-to-Revenue Constraint

Even after the upgrade, Fitch noted that Ghana’s “interest costs remain high, with the interest-to-revenue ratio expected to stay around 20% through 2027” . This means that one-fifth of government revenue is consumed by debt service before a single cedi is spent on healthcare, education, or roads. A further rating upgrade could reduce this ratio; a downgrade would worsen it.

Part 3: Channel Two — Exchange Rate Stability

The academic literature confirms that sovereign credit ratings have a measurable, statistically significant impact on the Ghanaian cedi—particularly when downgrades occur .

Academic Evidence from Ghana

A 2025 master’s thesis from Tufts University examined the short-term impact of sovereign credit rating changes on the GHS/USD exchange rate using both quarterly OLS and ARCH regressions, as well as daily event study analysis . The study tested whether announcements by Fitch, Moody’s, and S&P lead to immediate currency movements.

Key findings:

The explanatory mechanism: When rating agencies issue a downgrade, it signals higher risk to investors and reduces investor confidence in the economy. To offset resulting capital outflows, central banks often respond by increasing interest rates to retain or attract foreign investment by compensating for perceived risks . This dynamic is particularly relevant to Ghana given its reliance on foreign-denominated debt and international capital markets.

The Cedi’s Recovery

By May 2026, Fitch noted that Ghana’s currency appreciation had been a significant factor in the upgrade decision: “Inflation slowed to 3.2 per cent year-on-year in March 2026, its lowest level since 1999, helped by exchange-rate appreciation” . The agency noted that Ghana’s unencumbered reserves increased by $5.4 billion in 2025 to $12.3 billion, equivalent to 3.6 months of external payments .

This recovery illustrates the virtuous cycle of rating upgrades: stronger reserves → improved rating → increased investor confidence → currency stability → lower inflation → further reserve accumulation. The vicious cycle of downgrades works in reverse.

Part 4: Channel Three — Foreign Direct and Portfolio Investment

Credit ratings serve as a signalling mechanism for international investors who lack the resources to conduct independent country-by-country risk assessments. A strong rating reduces perceived risk and can attract both foreign direct investment (FDI) and portfolio investment .

The Access Bank Perspective

At a breakfast seminar in Accra, Seyi Kumapayi, Executive Director for African Subsidiaries at Access Bank Plc, argued that “sustained improvement in Africa’s access to funding, particularly from foreign markets, will require improvement of sovereign ratings from credit rating agencies and a change in risk perception from potential investors on investing in African countries and banks” .

Kumapayi explained that while alternative funding sources offer some solutions to funding gaps, “real progress would require stronger sovereign ratings and a shift from how investors view the risks of investing in Africa” . This involves improving the liquidity of local financial markets, making budget processes more transparent, and strengthening public institutions.

The Domestic Capital Market Angle

Yinka Adelekan, Managing Director of Agusto & Co, offered a complementary perspective at the same seminar, arguing that African countries should focus on raising funds locally to drive economic growth . “There’s a lot of funding internally, in terms of pension money that can be invested in corporate debt insurances,” Adelekan stated, suggesting that “companies in Africa are insulated to an extent from Foreign Capital Investment (FCI) risk” by relying on domestic rather than offshore loans .

This perspective highlights an important nuance: while external ratings affect access to international capital, building domestic capital markets reduces vulnerability to external rating actions. Ghana’s ability to issue a GHS 3.8 billion seven-year bond in April 2026—in local currency—demonstrates that domestic demand for government debt is recovering alongside international confidence .

Channel Five — Domestic Credit Markets and Corporate Borrowing

Sovereign credit ratings have spillover effects on private sector borrowing. The “sovereign ceiling” concept—the notion that no private entity in a country can be rated higher than the sovereign—has been relaxed by rating agencies in recent years, but the sovereign rating still heavily influences the cost and availability of credit for Ghanaian banks and corporations .

The Corporate Transmission Channel

When Ghana’s sovereign rating was downgraded in 2022, the interest rates that Ghanaian banks paid on international syndicated loans increased. These higher costs were passed on to local businesses in the form of higher lending rates and tighter credit conditions—even for companies with strong fundamentals that had nothing to do with government debt.

Conversely, the 2026 upgrade signals to international lenders that Ghanaian risk has decreased. This should translate, with a lag, into lower borrowing costs for Ghanaian banks and, eventually, lower interest rates for Ghanaian businesses.

The Limitations of Rating Improvements

Professor Godfred Bokpin of the University of Ghana has cautioned that while the rating upgrade is positive, it has come at a high cost to ordinary citizens . He noted that the government has concentrated heavily on expenditure-based fiscal consolidation—cutting spending to achieve fiscal targets—rather than revenue-based measures . “When you switch to expenditure-based fiscal consolidation, in the immediate, your books may look good, and the numbers may look very appealing, but you have sacrificed so much,” Bokpin warned .

This critique highlights an important distinction: a rating upgrade benefits the government’s borrowing costs and international standing, but the policies that produce the upgrade (austerity, spending cuts) may impose real costs on citizens. The challenge for policymakers is balancing the market’s demand for fiscal discipline with the population’s need for public services and economic opportunity.

Part 5: The Recent Upgrade — Drivers, Implications, and Cautions

What Drove the Upgrade

Fitch’s May 2026 upgrade from B- to B cited specific, measurable improvements :

The agency noted that Ghana’s public debt-to-GDP ratio had declined “sharply” and was expected to reach 46% by 2027—below the projected average for countries with similar ‘B’ ratings . The agency also noted “improvements in public financial management” that “reduce the risk of fiscal slippages” .

What Could Trigger a Further Upgrade

Fitch indicated that a further upgrade could occur if Ghana maintains “continued fiscal prudence underpinned by improved public financial management, further normalisation of macroeconomic conditions evidenced by an expected decline in average inflation, and a further building of external buffers” .

What Could Trigger a Downgrade

Conversely, Fitch warned that “weaker fiscal performance, rising debt service costs, or failure to build external reserves could lead to a downgrade in future” . Given that Ghana’s interest-to-revenue ratio is expected to remain around 20% through 2027, any significant fiscal slippage would quickly be reflected in rating agency assessments.

The Agusto & Co Perspective

Dr Kwesi Eduafo Yankey, Managing Director of Dumakwae Limited, argued at the Agusto & Co seminar that “credit ratings have been known to provide much-needed transparency and access to long-term and affordable financing, all of which were critical to sustainable economic growth and development” . Specifically, he noted that “credit ratings provide an essential measure of relative credit risk, facilitating the efficient issuance and purchase of bonds and other debt instruments” .

Yankey’s conclusion is instructive: “It is, therefore, in our interest to advocate and develop a transparent and contextually relevant credit ratings culture” . This suggests that Ghana should not merely react to external ratings but should build the institutional capacity to influence them through transparent, credible policies.

Conclusion: Ratings as Report Card, Not Destiny

Credit ratings are not arbitrary verdicts imposed from abroad. They are assessments of Ghana’s economic fundamentals and policy credibility—and they directly affect borrowing costs, the cedi’s stability, and the business environment.

The May 2026 upgrade from B- to B with a Positive Outlook is a significant achievement, representing the cumulative effect of debt restructuring, fiscal consolidation, currency stabilisation, and reserve accumulation . Fitch projects that Ghana’s debt-to-GDP ratio will continue falling to 46% by 2027, that reserves will reach 4.8 months of import cover, and that the economy will grow at approximately 5% through 2027 .

But ratings improvements are not neutral. Professor Bokpin’s critique is essential: the same fiscal discipline that produces rating upgrades also imposes costs—on public services, on social spending, and on citizens who bear the burden of austerity . The question for policymakers is whether the benefits of improved ratings (lower borrowing costs, increased investor confidence, cedi stability) outweigh these costs in the long run.

For investors, the message is clear: Ghana’s creditworthiness has improved, but the country remains in speculative grade territory. The Positive Outlook suggests further upgrades are possible if reforms continue, but the risks—particularly external shocks and debt service pressures—remain significant .

For citizens, the stakes are equally clear: credit ratings affect the fiscal space available for healthcare, education, and infrastructure. Every basis point saved on borrowing costs is a cedi that can be spent on development rather than debt service. Whether those savings materialise—and whether they reach the population—depends on policy choices that ratings alone cannot capture.

Ghana’s rating history from 2003 to 2022 demonstrates that the country has cycled between improvement and deterioration . The current upgrade is a milestone—but it is not a destination. Maintaining and improving upon it requires continued fiscal discipline, transparent governance, and a balanced approach that serves both international investors and Ghanaian citizens.

The report card is improving. The real work lies ahead.

Quick Reference: How Credit Ratings Affect Ghana

Last Updated on June 10, 2026 by Samuel Kwame Boadu

Samuel Kwame Boadu

Samuel Kwame Boadu is a Ghanaian media entrepreneur and storyteller with a passion for amplifying urban voices and uncovering everyday truths. He is the Editor-in-Chief and Founder of Accra Street Journal, a dynamic digital platform dedicated to capturing the pulse of Ghana’s capital—its people, culture, challenges, business, sports and innovations.

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