A Ranking Member on Parliament’s Finance Committee has predicted that rating agencies such as Fitch, S&P and Moody are expected to downgrade the country’s rating to default.

This, Dr Cassiel Ato Forson explained on his Twitter handle, is due to the government's announcement that it is suspending the payment of its external debt including Eurobonds, commercial and bilateral loans.

Ghana just announced it can't service external debt including Eurobonds, commercial and bilateral loans!

FYI, we cannot repay our debt because we are insolvent or bankrupt!

Fitch, S&P and Moody's are expected to immediately downgrade our rating to Default ( D)!

Asem oo! pic.twitter.com/he6t8C6Vvv

— Cassiel Ato Forson(PhD) (@Cassielforson) December 19, 2022

According to Dr Forson,”We [Ghana] cannot repay our debt because we are insolvent or bankrupt!”

Ghana has in the recent past been downgraded by rating agencies, the latest being Moody’s downgrading the Government of Ghana’s long-term issuer ratings to Ca from Caa2 or further junk status and changing the outlook to stable.

This concludes the review for the downgrade that was initiated on September 30, 2022.

“The Ca rating reflects Moody’s expectation that private creditors will likely incur substantial losses in the restructuring of both local and foreign currencies debts planned by the government as part of its 2023 budget proposed to Parliament on 24 November 2022″, a statement published on its website said.

The statement pointed out that “...given Ghana’s high government debt burden and the debt structure, it is likely there will be substantial losses on both categories of debt in order for the government to meaningfully improve debt sustainability”.

It explained further that the stable outlook balances Moody’s assumption that the debt restructuring will happen in coordination with creditors and under the umbrella of a funding programme with the IMF against the potential for a less orderly form of default that could result in higher losses for private-sector creditors.

On Monday, December 19, 2022, the Government of Ghana announced it is suspending debt service payments on certain categories of external debt including Eurobonds, commercial loans and most bilateral debt. 

According to the government, this is aimed at bringing the country’s unsustainable debt level under control – a statement from the Ministry of Finance said. 

In the said release, the Ministry noted that debt payment suspension is “an interim emergency measure pending future agreements with all relevant creditors.”

However, this move will not affect debts contracted on or after December 19, 2022. 

“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.”

Meanwhile, the government has assured its external creditors that engagement on the move will be fair and transparent. 

“The Government stands ready to engage in discussions with all of its external creditors to make Ghana’s debt sustainable through a fair, transparent and comprehensive debt restructuring exercise in line with international best practices.

“The Ministry of Finance will hold an investor presentation at a date to be announced at a later stage,” the statement concluded.