According to Moody’s Investor Services, under the government’s proposed debt restructuring program, private creditors and investors are likely to suffer significant losses on their investments.
The agency anticipates that the debt restructuring scheme will have an effect on both holders of local and foreign currency, moving Ghana from an earlier Caa2 rating to Ca rating, which is further into the junk category.
The government planned to restructure both domestic and foreign currency debts as part of the 2023 budget that was submitted to Parliament on November 24, according to a statement released by Moody’s on November 29, 2022. “The Ca rating reflects Moody’s expectation that private creditors will likely incur substantial losses in the restructuring of both domestic and foreign currency debts,” the company said.
“Given Ghana’s high government debt burden and the debt structure, it is likely there will be substantial losses on both categories of debt in order for the government to meaningfully improve debt sustainability,” it further explained.
Despite the possible losses under the debt restructuring programme, Moody’s changed Ghana’s outlook to stable on the basis that the debt restructuring exercise will occur in accordance with creditors under the IMF-supported programme.
“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,” the rating firm explained.
Meanwhile, the latest downgrade of Ghana’s credit ratings comes after Fitch Ratings had recently ranked the country at CC which is two levels above default while S&P Global Ratings rated Ghana in CCC+ status placing it in junk territory.
Ghana’s credit rating by Moody’s is now ranked as the second lowest score by the firm. This however puts the country on the same level as Sri Lanka which is already in default.