Moody’s downgrades Ghana’s sovereign rating to B3; outlook negative

Moody’s has downgraded Ghana’s sovereign rating to B3 with a negative outlook.

The ratings agency announced Thursday March 19, 2015 that it downgraded Ghana’s issuer and senior unsecured rating by one notch to B3 from B2, and the outlook on the rating is negative.

According to Moody’s the key drivers of today’s rating action are the following:

1) Deteriorating debt dynamics as reflected by an increasing debt burden due to large fiscal imbalances and a sharp weakening of the country’s national currency, combined with reduced debt affordability stemming from a high cost of funding in the domestic market;

2) increased government liquidity risks, as the government faces large gross borrowing requirements amid more difficult domestic and external funding conditions.

Moody’s noted that the negative outlook reflects further downside risk to the country’s debt dynamics and liquidity pressure in the short-term if the country’s policies fail to successfully contain its fiscal deficit, stabilize its currency and address current impediments to higher economic growth.

Concurrently, Moody’s has changed the foreign-currency bond ceiling to Ba2 from Ba3 and the foreign currency deposit ceiling to Caa1 from B3, it says. It has also changed the local currency bond and deposit country ceilings to Ba3 from Ba2.

By Emmanuel K. Dogbevi