S&P downgrades Ghana to further default status after Eurobond payment suspension

S&P Global Ratings has cut Ghana to default following the country's announcement of a suspension of debt payments.

According to a Bloomberg report, the action "complicates the planned debt restructuring meant to unlock a bailout by the International Monetary Fund."

"The West African nation, which has $13 billion of foreign bonds, was downgraded to selective default from CC due to the moratorium on debt payments, the credit assessor said in a Tuesday statement. The default comes as Ghana suffers from "very low net reserves, a volatile exchange rate, high inflation, and the weakened economy," Bloomberg noted in its December 20, 2022 report.

"We expect to lower our ratings on Ghana's foreign currency issues to 'D' (default) if the government fails to make the next scheduled coupon payment on its commercial foreign currency debt," a quote from the agency obtained by myjoyonline said.

The rating by S&P was expected as the suspension of the debt payments signified a default by the country.

Government to suspend debt service payments under certain categories

The government, through the Ministry of Finance, has said it will suspend all debt service payments under certain categories of the country's external debt component.

The move, according to the government, is an interim emergency measure pending further agreement with the relevant creditors, while some analysts have described it as Ghana effectively defaulting on its external debt.

A statement issued by the Ministry and sighted by GhanaWeb Business noted the decision is pending an orderly restructuring of the affected debt obligations.

It explained that the suspension will include payments on Ghana's Eurobonds; Ghana's commercial term loans; and a large portion of Ghana's bilateral debt.

"This suspension will not include the payments of our multilateral debt, new debts (whether multilateral or otherwise) contracted after 19th December 2022 or debts related to certain short-term trade facilities," the statement noted.

"We are also evaluating certain specific debts related to projects with the highest socio-economic impact for Ghana which may have to be excluded. This suspension is an interim emergency measure pending future agreements with all relevant creditors," it added.

The Finance Ministry, however, added that the government is keen on holding engagements with its external creditors in order to undertake a transparent, fair, and comprehensive debt restructuring exercise in line with international best practices.

It further pointed out that the Ministry of Finance will hold an investor presentation at a date that will be announced in due course.



SSD/BOG