Ghana's long-term issuer and senior unsecured debt ratings have been downgraded by international rating agency Moody's Investors Service to Caa2 from Caa1 and are currently being reviewed for a downgrade.

The downgrade, in the opinion of Moody's, reflects the recent macroeconomic deterioration of Ghana's economy, which led to further heightened government liquidity issues, challenges with debt sustainability, and a higher probability of default on debt.

On September 30, 2022, Moody's published a statement on its official website stating that "Without external support, the government's policy levers to arrest a worsening macroeconomic backdrop and heavier debt burden are extremely limited; the government's small revenue base, large and increasingly absorbed by interest payments, further intensifies the policy dilemma between competing objectives, including servicing debt while meeting essential social needs."

It however explained that the initiation of the review for downgrade is prompted by the ongoing negotiations between the government of Ghana and the IMF over a funding programme that may include a condition for debt restructuring to ensure debt sustainability.

"Such a restructuring would likely be considered a distressed exchange and thereby a default under the rating agency's definition. The review will evaluate the likelihood of a debt restructuring being a prerequisite to secure sufficient and durable financing from official sources to avert a fiscal and balance of payments crisis that is already unfolding," Moody's noted.

In addition to the rating downgrade, Moody's has also downgraded Ghana's bond enhanced by a partial guarantee from the International Development Association (IDA, Aaa stable) to Caa1 from B3.

This reflects a blended expected loss consistent with a one-notch uplift on the issuer rating.

Meanwhile, the rating has also been placed on review for downgrade given the review initiated on all unsecured debt ratings of the government.