Moody’s Downgrades Ghana’s Credit Ratings To Ca

Moody’s Investors Service has downgraded Ghana’s long-term issuer ratings from Caa2 to Ca.

The downgrade, Moody’s said, spans from the government’s planned debt restructuring which will likely see creditors losing their investments.

“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 for the government to meaningfully improve debt sustainability.

“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.”

In spite of this, Moody’s changed the outlook to stable.

In a publication, the rating agency said, the stable outlook reflects the assumption that the debt restructuring will happen in a coordinated and orderly manner with creditors under the umbrella of a funding program with the IMF.

“The risk of higher losses for private-sector creditors than currently assumed by Moody’s is relatively contained, supported by Ghana’s economy and institutional framework.”

According to Moody’s, Ghana’s credit profile will likely remain very weak until after the debt has been restructured.

It noted that smaller losses for private sector creditors as part of the debt restructuring could prompt an upward revision to the rating.

At the end of September, Moody’s downgraded Ghana’s credit ratings to Caa2 citing heightening liquidity, debt sustainability difficulties and increasing risk of default as one of the reasons for the downgrade.

In addition to that, Moody’s downgraded Ghana’s senior unsecured debt ratings to Ca from Caa2 and the senior unsecured MTN programme ratings to (P)Ca from (P)Caa2, along with downgrading to Caa3 from Caa1 the rating of Ghana’s bond enhanced by a partial guarantee from the International Development Association (IDA, Aaa stable), concluding the concurrent reviews for downgrade.

The agency noted, “the latter reflects a blended expected loss consistent with a one-notch uplift on the issuer rating.”

Finally, Moody’s has lowered Ghana’s local currency (LC) and foreign currency (FC) country ceilings to respectively Caa1 and Caa2, from B2 and B3, mirroring the downgrade of the sovereign ratings by two notches.

“Non-diversifiable risks are captured in a LC ceiling three notches above the sovereign rating, taking into account relatively predictable institutions and government actions, limited domestic political risk, and low geopolitical risk; balanced against a large government footprint in the economy and the financial system and external imbalances.

“The FC country ceiling one notch below the LC country ceiling reflects constraints on capital account openness and very weak policy effectiveness against authorities’ history of providing access to foreign exchange.”

Source: opemsuo.com/Hajara Fuseini