Fitch Downgrades Ghana’s Local Currency

The international rating agency, Fitch Ratings, has downgraded Ghana’s Long-Term Local-Currency (LTLC) Issuer Default Rating (IDR) to Restricted Default (RD) from ‘CCC’ where the local currency had been upgraded to.

In addition to that, the agency has withdrawn the issue ratings on five local-currency bonds issued before the domestic debt exchange.

Restricted Default (RD) means Ghana has experienced an uncured payment default or distressed debt exchange on a bond, loan or other material financial obligation, but had not entered into bankruptcy filings, administration, receivership, liquidation, or other formal winding-up procedure, and had not otherwise ceased operating.

It will be recalled that in March this year, Fitch upgraded Ghana’s local currency from ‘CC’ to ‘CCC’ citing the completed DDEP, resumption in payments on Local Currency bonds and reduction in Ghana’s cash fiscal deficit in 2023 to 4.5% of GDP in 2023.

In its April report on Ghana, the agency attributed the downgrade to the government’s inability to honour bonds that were not tendered or that are held by entities not eligible for participating in the domestic debt exchange.

On local bonds, Fitch explained, “35 payments, whether principal or coupon, were due on the outstanding ‘old bonds’ between 20 January 2023 and 20 April 2023. Fitch has downgraded to ‘CC’ from ‘CCC’ the issue rating of five local-currency bonds issued prior to the debt exchange and has subsequently withdrawn the rating on these securities due to the limited information and uncertainty regarding the timely servicing of the securities issued prior to the domestic debt exchange.”

In the meantime, Fitch has maintained Ghana’s Long-Term Foreign-Currency (LTFC) IDR at ‘RD’ as it was pegged in February.