Moody’s on Friday downgraded Ghana’s long-term foreign debt rating to Caa2 from Caa1.
The rating outlook was also changed from stable to negative watch. According to the agency, 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. Moody’s also placed Ghana on review for a downgrade, saying that the decision was prompted by the ongoing negotiations between the government and the IMF over a funding programme that may include a condition for debt restructuring to ensure debt sustainability.
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.