Moody's downgrades Ghana

Moody's Investors Service said it downgraded the government of Ghana's long-term issuer and senior unsecured debt ratings to Caa2 from Caa1 and placed the ratings on review for downgrade. The agency also lowered the senior unsecured MTN program ratings to (P)Caa2 on review for downgrade from (P)Caa1.

“The rating downgrade to Caa2 reflects the recent macroeconomic deterioration, further heightening the government's liquidity and debt sustainability difficulties and increasing the risk of default. Despite Ghana's tightening of monetary policy in response to the global price shock, inflation continues to rise from high levels and the currency has been under very significant pressure. Combined, a sharp rise in interest rates, high inflation and a rapidly weakening currency exacerbate the government's debt challenges,” Moody’s said in a press release.

The review was prompted by the ongoing talks between the government and the IMF over a funding program that may include a condition for debt restructuring to ensure debt sustainability, the agency said.

“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 said.

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