Moody’s downgrades Ghana’s credit rating from Caa2 to Ca.

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