Prof. Eric Osei-Assibey, a Senior Lecturer at the Department of Economics – University of Ghana, has warned against the expectation of more downgrades from rating agencies until a deal is reached between government and external debt holders, as well as the International Monetary Fund (IMF).
Speaking at the American Chamber of Commerce-Ghana 2023 Economic Outlook Report, Dr. Osei-Assibey narrated the recent downgrade by Fitch – a rating agency, on Ghana’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating to ‘Restricted Default’ from ‘C’ as worrying and panicking.
“This is not good but once you have this negative information coming up every now and then affecting the currency and others, we should expect more of this until government reaches an agreement with the IMF and external debts holders.”
Prof. Eric Osei-Assibey
According to Dr. Osei-Assibey, putting in place right policies will be the yardstick for the economy to witness a rebound in the medium term.
“These things will come but I’m sure with time the economy will be stable with the IMF programme. Government as I said earlier should support various sectors of the economy.”
Prof. Eric Osei-Assibey
The American Chamber of Commerce Ghana 2023 Economic Outlook Report provided insight into government’s tax provision, fiscal and monetary development, debt sustainability and key macroeconomic performance and targets.
Adeverse Impact Of Economy Ratings On The Cedi
Meanwhile, latest ratings by agencies in line with Ghana’s economy have had a massive impact on the cedi – These ratings have driven the cedi lower.
AZA Finance – a global fintech company that accelerates economic growth in Africa, has disclosed that the Cedi weakened against the dollar, trading at 12.76 from 12.38 at close of last week as Fitch Ratings cut Ghana’s foreign currency credit rating to ‘restricted default’ after the country missed a $40.6m coupon payment on one of its outstanding Eurobonds.
According to AZA Finance, the downgrade aligns with Fitch’s local currency rating, which was cut earlier this month.
“The foreign debt default was largely expected after Ghana said it would suspend payments on certain bonds as part of its restructuring plan to unlock $3bn in emergency funding from the IMF.
“The country faces pushback from bondholders over preferential treatment for bilateral lenders – who are being offered better terms in the debt restructuring. Against this backdrop and with inflation remaining elevated despite a slight improvement in January, we expect the Cedi to depreciate further in the near term.”
AZA Finance
Fitch Lowers Ghana To ‘Restricted’ Default After Coupon Payment Missed
It can be recalled that Fitch further downgraded Ghana’s local debt rating from ‘C’ to ‘restricted default’ after the country missed the grace period to make a coupon payment $40.6 million on one of its Eurobonds.
Not limited to that, Fitch also downgraded the rating of the country’s $1 billion Eurobond maturing on January 18, 2026 to ‘D’ from ‘C’ and withdrawn its rating.
Ghana on Friday missed making the $40.6 million coupon payment on its $1 billion 2026 Eurobond as part of the suspension of payments on selected external debt that the government announced in December.
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