S&P Global Ratings has downgraded Ghana’s long-term local currency bonds to “selective default”.
This follows an initial downgrade from B-/B to CCC+/C in August, which was attributed to increasing financing and external pressures on Ghana’s economy.
According to the American credit rating agency, Ghana’s foreign currency debt has now been cut from “CCC-plus” to “CC” with default being a “virtual certainty”.
This downgrade further reduces Ghana’s creditworthiness and ability to attract more foreign investors.
The government’s decision to launch a domestic debt exchange programme appears to have played a significant role in S&P’s current assessment of Ghana’s economy.
“We lowered our LC long term rating on Ghana to “SD” following the Ministry of Finance’s offer of a domestic debt restructuring, with the objective of lowering interest costs and back-loading refinancing requirements. We view Ghana’s debt restructuring as distressed rather than opportunistic due to the government’s weak market access and the very high level and cost of debt in LC terms,” the report on December 6, 2022, said.
Finance Minister, Ken Ofori-Atta, on December 5, 2022, announced a debt exchange programme tailored towards a comprehensive agenda to restore debt and fiscal sustainability.
The government has made an invitation to “holders of domestic debt to voluntarily exchange approximately GH¢137 billion of the domestic notes and bonds of the Republic, including E.S.L.A. and Daakye bonds, for a package of New Bonds to be issued by the Republic.”
The move has been regarded as a clear admission of a probable default on its bonds.
This comes after Ghana’s second-biggest bank, GCB Bank, was downgraded by international rating agency, Moody’s.
GCB Bank’s long-term local currency deposit rating was downgraded to Caa3 from Caa2 and is one notch higher than the bank’s Ca long-term foreign currency deposit rating.
Again, its long-term foreign currency deposit ratings have also been downgraded from Ca to Caa2, its long-term Counterparty Risk Ratings (CRRs) to Caa3 from Caa2 and its long-term Counterparty Risk Assessment (CR Assessment) to Caa3(cr) from Caa2(cr).
The rating follows Moody’s action on December 2, 2022, to downgrade Ghana’s long-term issuer and senior unsecured debt ratings from Ca to Caa2 and place them on review for downgrade on November 29, 2022.
This is the second time in two years that Moody’s has downgraded the indigenous bank.
In 2022 alone, Ghana has faced about five downgrades by rating agencies, including Fitch.
Source: The Independent Ghana