An international rating agency, Fitch, has stated that there will be a further downgrade of Ghana’s creditworthiness to very deeper junk status.

Fitch downgraded Ghana’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to ‘C’ on December 21, 2022, from ‘CC’ as well as the issue ratings on outstanding foreign-currency debt.

This comes after the government announced the suspension of external debt payments.

According to Fitch, the suspension of interest payments on selected external debt, including Eurobonds, commercial term loans, and most bilateral debt is the beginning of a sovereign default process.

“On 20 December, the government announced plans to restructure its external sovereign debt, which will add to the pressure on banks’ capital. Details have yet to be announced but payments on selected external debt, including Eurobonds, commercial term loans, and most bilateral debt, have been suspended. Fitch views this as the beginning of a sovereign default process,” parts of Fitch’s statement read.

The issue rating on Ghana’s partially-guaranteed $1 billion notes maturing in 2030 was also downgraded to ‘CC’ from ‘B- ‘.

The dollar notes benefit from a partial credit guarantee (PCG) backed by the International Development Association of the World Bank for scheduled debt service payments of up to 40% of the original principal.

In the statement, Fitch said a multiple-notch uplift has been assigned to the notes to reflect its view that the PCG reduces the bonds’ potential for default and increases the possible recovery in the event of issuer default.

Meanwhile, S&P Global Ratings also downgraded the country to selective default status after the debt suspension announcement by the government.

SSD/BOG