The Long-Term Local-and Foreign-Currency Issuer Default Ratings (IDRs) of Ghana have been once again downgraded by the international credit rating agency, Fitch Ratings.
The rating agency, in August 2022, downgraded Ghana’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to ‘CCC’ from ‘B-‘.
In a release posted on its website (fitchratings.com), the agency indicated that it normally does not give credit ratings below CCC.
“Fitch Ratings has downgraded Ghana’s Long-Term Local- and Foreign-Currency Issuer Default Ratings (IDRs) to ‘CC’, from ‘CCC’. Fitch typically does not assign Outlooks to issuers with a rating of ‘CCC’ or below,” parts of the release read.
The ‘CCC’ rating implies that Ghana is considered a “junk” country in terms of investment and any investor who buys a bond issued by the Government of Ghana is at a high risk of not getting his/her investment.
On the reasons for the downgrade to CC, Fitch indicated that “The downgrade reflects the increased likelihood that Ghana will pursue a debt restructuring given mounting financing stress, with surging interest costs on domestic debt and a prolonged lack of access to Eurobond markets. There is a high likelihood that the IMF support programme currently being negotiated will require some form of debt treatment due to the climbing interest costs and structurally low revenue as a percentage of GDP.
“We believe this will be in the form of a debt exchange and will qualify as a distressed debt exchange under our criteria. The government has not confirmed or denied press reports that Ghana is preparing to negotiate a restructuring.
“Interest costs on external debt are lower than for domestic debt and near-term external debt amortizations appear manageable. However, we believe there could be an incentive to spread a debt restructuring burden across domestic and external creditors and therefore do not have a strong basis to differentiate between Foreign- and Local-Currency ratings at this time,” it added.