Member of Parliament for Ajumako-Enyan-Esiam Dr Cassiel Ato Forson, has called for prayers for Ghana as its credit rating has been cut deeper into junk territory by Moody’s Investors Service.
By this decision of Moody’s, it has become more likely that private lenders will suffer sharp losses in the government’s planned debt restructuring.
Moody’s downgraded the country’s ratings by two levels to Ca, the second-lowest score at the ratings agency.
The latest score puts Ghana in the same category with Sri Lanka, which is in default.
The downgrade is on the back of government plans to restructure both local and foreign debts announced in the 2023 budget, according to a Moody’s statement.
“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,” analysts Lucie Villa and Marie Diron wrote in the statement.
Moody’s also changed the country’s outlook to stable on the expectation that the planned debt restructuring will be done in coordination with lenders under a programme with the International Monetary Fund.
Ghana will ask holders of its international bonds to accept losses of as much as 30% on the principal and forgo some interest payments as it hammers out a debt-sustainability plan to qualify for a loan from the IMF, Deputy Minister of Finance John Kumah said last week.
The West African country formed a committee last month to start talks with domestic bondholders to restructure its local-currency debt.
Ghana’s Eurobonds have been among the worst performers in emerging markets since Bloomberg reported the plans for the local debt recast in September, handing investors losses of almost 12% in that period, according to data compiled from a Bloomberg index.
The nation’s debt-exchange program will replace existing terms and exchange debts with longer tenors at cheaper rates, said Abena Osei Asare, a deputy minister of finance. The plans come after an analysis of debt sustainability showed the nation faces high risk of distress.
Fitch Ratings scores the nation at CC, two notches above default. S&P Global Ratings assigns it CCC+, seven levels into junk.
Commenting on this in a tweet, Dr Ato Forson who is also a former Deputy Finance Minister said “Ghana and Sri Lanka are now so identical, both run family and friends government, share similar debt situations as well as economic crises. Pray for Ghana!”
Ghana and Sri Lanka are now so identical, both run family and friends government, share similar debt situations as well as economic crises.
Pray for Ghana! https://t.co/8Byx984qhp
— Cassiel Ato Forson(PhD) (@Cassielforson) November 30, 2022
By Laud Nartey|3news.com|Ghana with additional files from Bloomberg