Ghana’s credit rating was downgraded further into “junk status” after slumping oil prices affected government’s budget deficit, giving it a negative outlook.
Standard and Poor’s assesses Ghana at an equivalent B-, while Fitch Ratings has it one grade higher, at B.
Moody’s gave the following justifications for the downgrade.
- Deteriorating debt dynamics as reflected by an increasing debt burden due to large fiscal imbalances and a sharp weakening of the country’s national currency, combined with reduced debt affordability stemming from a high cost of funding in the domestic market;
- increased government liquidity risks, as the government faces large gross borrowing requirements amid more difficult domestic and external funding conditions.
The negative outlook reflects further downside risk to the country’s debt dynamics and liquidity pressure in the short-term if the country’s policies fail to successfully contain its fiscal deficit, stabilize its currency and address current impediments to higher economic growth.
Concurrently, Moody’s has changed the foreign-currency bond ceiling to Ba2 from Ba3 and the foreign currency deposit ceiling to Caa1 from B3.
Moody’s has also changed the local currency bond and deposit country ceilings to Ba3 from Ba2.
This move is the second downgrade by Moody’s in less than a year for a nation that is receiving $940 million loan from the International Monetary Fund.