A day after Ghana stated it will stop making part of its debt payments to creditors outside the nation, notably holders of Eurobonds, S&P cut Ghana’s sovereign rating from CC to “selective default.”
The international rating agency has reduced Ghana’s credit rating to further junk status twice in the past two weeks.
The rating agency did not provide an outlook because it sees the moratorium as a “selective default.”
If the government doesn’t pay the next scheduled coupon on its commercial foreign currency debt, the ratings agency said, “We expect to drop our ratings on Ghana’s foreign currency issues to ‘D’ (default).
When it downgraded the country on December 7, 2022, it claimed that Ghana’s proposed local debt swap was a “distressed exchange offer,” giving those bonds the “selective default” rating, while the downgrade of the foreign currency bonds was in response to the government’s declared intentions to restructure that debt.
In anticipation of an orderly restructuring of the impacted debts, the government stated on December 19, 2022, that all debt service payments under specific categories of external debt will be suspended.
Payments on commercial term loans, Eurobonds, and the majority of bilateral debt were all suspended.
According to a statement from the Finance Ministry, this suspension will not apply to payments for multilateral debt, new obligations (whether multilateral or otherwise) incurred after December 19, 2022, or debts owed in connection with certain short-term trading facilities.
It was anticipated that the rating agencies would lower their ratings as a result of this government decision.