What Ghana’s recent CCC credit ratings mean

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Sun, 7 Aug 2022 Source: www.ghanaweb.com

American credit rating agency, Standard and Poor's (S&P) Global Ratings on Friday, August 5, pushed Ghana's debt further into speculative territory, lowering its foreign and local currency sovereign ratings to CCC+/C from B-/B.

According to a report by marketwatch.com, S&P said its outlook for the country remains negative, "reflecting Ghana's limited commercial financing options, and constrained external and fiscal buffers."

Credit Ratings are opinions about credit risk.

They can express a forward-looking opinion about the capacity and willingness of an entity to meet its financial commitments as they come due, and also the credit quality of an individual debt issue, such as a corporate or municipal bond, and the relative likelihood that the issue may default according to S&P.

They influence people to start and grow businesses, governments to improve infrastructure and also influence manufacturers to build factories and create jobs.

CCC/CC, Ghana’s current rating literally means junk implies that the country’s credit standings are highly speculative.

When a country’s bond ratings are junk, the country has a high likelihood of debt default. Investors stand a high risk of losing their funds.

However, the gains on high-risk bonds are high but this does not always entice investors to invest as some policies prohibit them from doing so.

A junk rating in effect affects investor confidence and poses a great risk to the bond market whiles increasing the value of the country’s debt.

S&P which is one of the ‘Big Three’ credit-rating agencies, including Moody's Investors Service and Fitch Ratings, in their report stated that the “Covid-19 pandemic and the conflict in Russia have magnified Ghana's fiscal and external imbalances.”

"There is also demand for foreign currency that has been driven higher by several factors, including nonresident outflows from domestic government bond markets, dividend payments to foreign investors, and higher costs for refined petroleum products," the report added.

Meanwhile here are the various credit ratings and what they mean

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Source: www.ghanaweb.com
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