Moody’s Upgrades Ghana’s Local Currency Rating, Maintains Stable Outlook
Moody’s Investors Service (Moody’s) has raised Ghana’s local currency long-term issuer rating from Ca to Caa3, while maintaining a stable outlook.
The upgrade follows the successful completion of the government’s primary restructuring of local currency debt, resulting in reduced expected losses on future local currency debt.
This debt exchange has provided Ghana with some fiscal relief, decreasing the likelihood of seeking a similar-scale debt restructuring from the same creditors in the near to medium term. This move aims to safeguard Ghana’s financial sector from potential damage.
Moreover, official sector support has commenced, with the International Monetary Fund (IMF) disbursing funds as part of its program with the country.
However, the Caa3 rating still signifies the existing risk of potential default, as Ghana continues to address its local currency debt that remains unrestructured and restructures its foreign currency debt.
The stable outlook reflects a balance between downside and upside risks. On one hand, prolonged negotiations regarding the restructuring of the government’s foreign currency debt and limited access to local currency funding pose downside risks that could lead to more substantial losses than indicated by the Caa3 rating in another local currency debt restructuring.
On the other hand, there is the possibility of a relatively smooth process for restructuring foreign currency debt, supported by Ghana’s fiscal and external adjustment, with backing from the official sector, including the IMF. These factors contribute to the overall balanced outlook.