Moody’s downgrade Ghana’s economy

Ghana’s economy has suffered another downgrade, this time by Moody's Investors Service.

The international rating agency reduced the country’s long-term issuer and senior unsecured debt ratings to Caa2 from Caa1 and placed the ratings on review for downgrade.

The agency explained that the latest downgrade reflects the recent macroeconomic challenges of Ghana's economy.

It added that the economic woes have caused a deterioration of the government's liquidity, and debt sustainability difficulties, posing an increased risk of debt default.

Moody’s said on its official website on September 30, 2022: Without external support, the government's policy levers to arrest a worsening macroeconomic backdrop and heavier debt burden are extremely limited; the government's small revenue base, large and increasingly absorbed by interest payments, further intensifies the policy dilemma between competing objectives, including servicing debt while meeting essential social needs.”

It added that the reason for initiation of the review for downgrade is prompted by the ongoing negotiations between Ghana and the International Monetary Fund.

Such a restructuring would likely be considered a distressed exchange and thereby a default under the rating agency's definition. The review will evaluate the likelihood of a debt restructuring being a prerequisite to secure sufficient and durable financing from official sources to avert a fiscal and balance of payments crisis that is already unfolding,

Moody's has also downgraded Ghana's bond enhanced by a partial guarantee from the International Development Association (IDA, Aaa stable) to Caa1 from B3.

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