Global Ratings agency S&P has lowered the sovereign rating of Ghana to ‘selective default’ from CC, a day after the country announced it would suspend its external debt payments.
S&P Ratings said it views the moratorium as a ‘selective default’ and did not issue any outlook.
“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,” the rating agency said.
Ghana on Monday suspended payments on most of its external debt, effectively defaulting as the country struggles to plug its cavernous balance of payments deficit.
The Finance Minister, Ken Ofori-Atta, said Ghana will not service debts including its Eurobonds, commercial loans and most bilateral loans, calling the decision an “interim emergency measure”, while some bondholders criticised a lack of clarity in the decision.
The government “stands ready to engage in discussions with all of its external creditors to make Ghana’s debt sustainable”, the finance ministry said.
The suspension of debt payments reflects the parlous state of the economy, which led the government last week to reach a $3-billion staff-level agreement with the International Monetary Fund (IMF).
Ghana had already announced a domestic debt exchange programme and said that an external restructuring was being negotiated with creditors.
The IMF has said a comprehensive debt restructuring is a condition of its support.
The country has been struggling to refinance its debt since the start of the year after downgrades by multiple credit rating agencies on concerns it would not be able to issue new Eurobonds.