Moody’s Investors Service has upgraded the Government of Ghana’s local currency long-term issuer rating from Ca to Caa3, with a stable outlook.
The local currency senior unsecured MTN program rating has also been upgraded from (P)Ca to (P)Caa3.
The upgrade follows the completion of the government’s primary local currency debt restructuring, which has reduced the expected losses on local currency debt in the future. The debt exchange has also provided Ghana with some fiscal relief, reducing the likelihood of seeking another debt restructuring of a similar scale from the same creditors in the near to medium term.
However, the Caa3 rating still reflects the existing risk of potential default, which remains a tangible concern until Ghana settles its local currency debt that has not undergone restructuring and restructures its foreign currency debt.
The stable outlook indicates a balance between downside and upside risks. On the one hand, prolonged negotiations regarding the restructuring of the government’s foreign currency debt and increasing limitations on accessing local currency funding pose downside risks that could result in a more significant loss than indicated by the Caa3 rating in another local currency debt restructuring.
On the other hand, there is the possibility of a relatively smooth foreign currency debt restructuring process, coupled with Ghana’s fiscal and external adjustment supported by the official sector, including the IMF. These factors contribute to the balanced outlook.
The upgrade by Moody’s is a positive development for Ghana, but it is important to note that the country still faces significant challenges. The government will need to continue to implement its economic reforms and work to restructure its foreign currency debt in order to improve its credit rating and access to capital markets.