President Mahama dissolves all boards.
January 13, 2025
Moody’s has downgraded Ghana’s long-term issuer and senior unsecured debt ratings to Caa1 from B3, a reflection of the increasingly difficult task the government faces addressing its intertwined liquidity and debt challenges.
The ratings agency has also changed the outlook to stable from negative. Moody’s also downgraded the senior unsecured MTN programme ratings to (P)Caa1 from (P)B3 and the backed senior unsecured debt rating to B3 from B1.
Weak revenue generation is constraining budget flexibility and tight funding conditions on international markets have forced the government to rely on costly debt with shorter maturity says Moody’s. It estimates that interest payments will absorb more than half of the government’s revenue over the foreseeable future, which is exceptionally high compared to peers at all rating levels.
As a remedy, the government has proposed sharp fiscal consolidation and a switch to borrowings from external partners on more favourable terms. However, the strategy comes with sizeable implementation risks, especially in a still-fragile post-pandemic environment and while international market creditors price in very wide risk.
While Ghana’s external buffers and moderate external debt amortization schedule in the next few years afford the government a window of opportunity to deliver on its strategy, balance of payments pressures will build up the longer government’s large financing requirements have to rely on domestic sources.
The stable outlook balances Ghana’s significant fiscal challenges, large refinancing needs and constraints on access to funding against the government’s pre-pandemic track record of relatively effective policy delivery and maintenance of a variety of funding sources.
Ghana’s institutional framework and dynamic economy remain key credit supports, with economic growth forecasts of around 5% over the medium term.
Concurrent to the rating downgrade, Moody’s has also downgraded Ghana’s bond enhanced by a partial guarantee from the International Development Association (IDA, Aaa stable) to B3 from B1, reflecting a blended expected loss now consistent with a one-notch uplift on the issuer rating.
Finally, Moody’s has lowered Ghana’s local currency (LC) and foreign currency (FC) country ceiling to respectively B1 and B2 from Ba3 and B1.
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