Ghana will reach a debt deal with its external creditors in the second half of next year, according to Fitch Solutions.

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“Indeed, we believe that Ghana will reach a debt deal with its external creditors in H224 [half-year 2024]," Fitch indicated, adding that this would "provide tailwinds to the exchange rate and further limit imported price pressures”.

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The real Gross Domestic Product (GDP) growth is expected to remain well below trend on the back of fiscal consolidation efforts under the International Monetary Fund (IMF) programme.

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The Central Bank will however likely seek to lower interest rates to stimulate economic activity.

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Fitch Solutions, a UK-based firm, predicts that the Bank of Ghana will reduce its policy rate by 600 basis points to 22% by the end of next year. The reason behind this anticipated rate cut is the expected downward trend in inflation starting from the fourth quarter of this year.

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The firm forecasts that in 2024, the Bank of Ghana will continue its approach of easing monetary policy, leading to a 600 basis points reduction in the benchmark interest rate, bringing it to 22.00% by the end of the year. According to Fitch Solutions, inflation is projected to average at 17.1% in 2024, primarily due to high base effects, particularly in the first half of the year, and stable exchange rates.

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These factors are expected to result in interest rates being in a positive territory, providing favorable conditions for economic growth and investment.

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Risks to outlook

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On the risks to the outlook, Fitch Solutions, said risks to its forecast are skewed towards higher interest rates.

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“If external debt restructuring negotiations stagnate, investor sentiment towards Ghanaian assets will weaken, which would likely trigger another round of currency depreciation”, it explained

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In this scenario, it added that, inflation would remain higher for longer, prompting the central bank to adopt a more hawkish stance than our current baseline scenario assumes.

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