Investors to incur substantial losses under debt restructuring programme - Moody's

Moody’s Investor Services has cautioned that private creditors and investors are likely to incur substantial losses on investments under government’s planned debt restructuring programme.

According to the firm’s latest verdict on Ghana from an earlier Caa2 rating to Ca rating which is a further junk territory, it expects that the debt restructuring programme will impact both local and foreign currency holders.

“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,” Moody’s said in a statement on November 29, 2022.

“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 further explained.

Despite the possible losses under the debt restructuring programme, Moody’s changed Ghana’s outlook to stable on the basis that the debt restructuring exercise will occur in accordance with creditors under the IMF-supported programme.

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

Meanwhile, the latest downgrade of Ghana’s credit ratings comes after Fitch Ratings had recently ranked the country at CC which is two levels above default while S&P Global Ratings rated Ghana in CCC+ status placing it in junk territory.

Ghana’s credit rating by Moody’s is now ranked as the second lowest score by the firm. This however puts the country on the same level as Sri Lanka which is already in default.

MA