After the government stopped making debt payments, the global ratings agency S&P lowered Ghana’s credit ratings to default. This complicates the planned debt restructure intended to enable an IMF bailout.
Due to the ban on debt payments, Ghana, which has $13 billion in foreign debts, was downgraded from CC to selected default, according to a statement released by the credit evaluator on Tuesday. According to economists Frank Gill and Ravi Bhatia, Ghana is experiencing “extremely low net reserves, a volatile currency rate, rising inflation, and a weaker economy” at the time of the default.
The sovereign’s ability to refinance its maturing debt has been hampered by all of these concerns, according to the S&P analysts. “Following the presentation of restructurings and their acceptance, we might improve the long-term ratings.”
Ghana caught investors by surprise earlier this week by announcing it would cease payments on its foreign bonds, commercial loans and most bilateral obligations pending an agreement with creditors. While plans for a broad restructuring of foreign and local debt had already been signaled, some expected the government to keep making payments in the interim.
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S&P is the first major rating company to declare Ghana’s foreign debt in default. Fitch Ratings and Moody’s Investors Service assign it the second-lowest rating. The Trade Association for the Emerging Markets said Monday the notes should trade flat.
A group of Ghana’s foreign bondholders — including Abrdn, Amundi, BlackRock and Greylock — have already organized to form a creditor committee ahead of debt restructuring negotiations.
Ghana’s bonds due in 2032 extended declines Tuesday, falling half a cent to 32 cents on the dollar, the lowest since late November.
The country’s local-currency debt score was slashed to default by S&P earlier this month after the government announced a voluntary domestic debt-exchange program that involved interest losses for holders.
