Following Ghana’s announcement of a suspension of debt payments, S&P Global Ratings has downgraded the country to default.
The decision “complicates the planned debt restructuring intended to trigger a rescue by the International Monetary Fund,” according to a Bloomberg article.
The West African country’s debt was downgraded from CC to selected default because of the ban on debt payments, the credit assessor said in a statement on Tuesday. The country has $13 billion worth of foreign debts.
According to Bloomberg’s December 20, 2022 article, Ghana is experiencing “extremely low net reserves, a volatile currency rate, significant inflation, and the weaker economy” at the time of the default.
The rating by S&P was expected as the suspension of the debt payments signified a default by the country.
Government to suspend debt service payments under certain categories
Government through the Ministry of Finance has said it will suspend all debt service payments under certain categories of the country’s external debt component.
The move according to government is an interim emergency measure pending further agreement with the relevant creditors while some analysts have described it as Ghana effectively defaulting on its external debt.
A statement issued by the Ministry and sighted by GhanaWeb Business noted the decision is pending an orderly restructuring of the affected debt obligations.
It explained that the suspension will include payments on Ghana’s Eurobonds; Ghana’s commercial term loans; and a large portion of Ghana’s bilateral debt.
“This suspension will not include the payments of our multilateral debt, new debts (whether multilateral or otherwise) contracted after 19th December 2022 or debts related to certain short-term trade facilities,” the statement noted.
“We are also evaluating certain specific debts related to projects with the highest socio-economic impact for Ghana which may have to be excluded. This suspension is an interim emergency measure pending future agreements with all relevant creditors,” it added.
The Finance Ministry however added that government is keen on holding engagements with its external creditors in order to undertake a transparent, fair and comprehensive debt restructuring exercise in line with international best practices.
It further pointed out that the Ministry of Finance will hold an investor presentation at a date that will be announced in due course.