Ghana’s Issuer Default Rating (IDR) for Long-Term Foreign-Currency (LTFC) was downgraded from “B-” to “CCC,” or junk status.
According to the statement, the downgrade reflects the state of Ghana’s public finances, which have made it difficult for the country to access the Eurobond markets for an extended period of time and consequently caused a significant drop in external liquidity.
“In the absence of new external financing sources, international reserves will fall close to two months of current external payments (debits in the current account) by end-2022”.
The government has asked the International Monetary Fund for assistance, which will probably result in more funding from the Fund and other multilateral lenders.
According to Fitch in regards to Fitch Downgrades Ghana ;
“The government’s high-interest costs and structurally low revenue as a percentage of Gross Domestic Product have increased the likelihood that IMF support would necessitate some form of debt treatment, although this is not our main scenario. The high-interest burden on local-currency debt also means that the inclusion of a domestic debt treatment cannot be ruled out”.
“We estimate that a programme could disburse as much as $3 billion and unlock budget support from other multilateral lenders. However, the timing of such a deal is uncertain and would be dependent on the government’s ability to present a credible fiscal reform plan in line with increasing government revenue and improving debt affordability metrics”.