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| Moody’s downgrades Ghana’s credit rating from Caa2 to Ca. |
Ghana has been downgraded farther into junk territory by Moody’s
Investors Service on the possibility that private creditors would experience
substantial losses during the government’s planned debt restructuring.
According to a statement released by Moody's on Tuesday, the
country's credit rating was reduced by two notches to Ca, the second-lowest
grade. To put it another way, Ghana is now in the same boat as Sri Lanka.
The downgrade comes after the government of Ghana announced a
budget that would restructure both domestic and international debts in the year
2023.
“The Ca rating reflects Moody’s expectation that private creditors
will likely incur substantial losses in the restructuring of both local and
foreign currencies debts planned by the government as part of its 2023 budget
proposed to Parliament on 24 November 2022.
“Given Ghana’s
high government debt burden and the debt structure, it is likely there will be
substantial losses on both categories of debt in order for the government to
meaningfully improve debt sustainability,” analysts Lucie Villa and Marie Diron
wrote in the statement.
Outlook changed to stable
Since the restructuring is expected to occur in tandem with
creditors and under a programme with the International Monetary Fund (IMF),
Moody's has upgraded Ghana's outlook to stable.
“The stable outlook balances Moody’s assumption that the debt
restructuring will happen in coordination with creditors and under the umbrella
of a funding program with the IMF against the potential for a less orderly form
of default that could result in higher losses for private-sector creditors.”
Last month, a committee was established in the West African nation
to begin bondholder negotiations for a restructure of its
local-currency debt.
Since Bloomberg published the plans for the local debt recast in
September, Ghana's Eurobonds have been among the worst performers in developing
markets, giving investors losses of roughly 12% in that time.
Abena Osei Asare, the country's deputy finance minister, has said
that the country's debt-exchange scheme would replace current terms and swap
loans with longer tenors at lower rates. An assessment of the country's
capacity to pay its debts has shown a very real possibility of economic
hardship, prompting the new measures.
A CC rating from Fitch Ratings places a country only two notches
above insolvency. It was also given a CCC+ rating by S&P Global Ratings,
which places it seven notches below junk status.
Also Read: S&P downgrades Ghana's credit rating from B- to CCC+ -Report.
Source:
ghananews.hrforum.uk
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