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Moody’s Investors Service (Moody’s) has raised the local currency long-term issuer rating of the Government of Ghana to Caa3 from Ca, with a stable outlook.
Moody’s has upgraded the rating of the local currency senior unsecured MTN program to (P)Caa3 from (P)Ca. This upgrade comes from the government’s successful restructuring of its main local currency debt, reducing Moody’s expectations of future losses in this area.
The debt restructuring has provided Ghana with some fiscal relief, making it unlikely for the country to pursue another debt restructuring of a similar scale soon. Such a move would have significant negative implications for Ghana’s financial sector.
Ghana has received support from the official sector, with the International Monetary Fund (IMF) making its first disbursement under its program with the country.
However, the Caa3 rating still reflects a significant risk of redefault. It will persist until Ghana resolves its outstanding local currency debt that has yet to undergo restructuring and restructures its foreign currency debt.
The stable outlook shows a balance between potential downside and upside risks. On one hand, prolonged negotiations over restructuring the government’s foreign currency debt and increased difficulties accessing local currency funding pose downside risks. This might result in another local currency debt restructuring with larger losses than expected by the Caa3 rating.
Restructuring foreign currency debt may progress smoothly, while the official sector, including the IMF, could support Ghana’s fiscal and external adjustments.
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Source: Omanghana.com
