Fitch Follows S&P by Cutting Ghana Debt Rating Further Into Junk

Moses Mozart Dzawu, Bloomberg News

Crowds of customers make their way through a food market in Accra, Republic of Ghana, on Wednesday, Nov. 3, 2021. Ghana’s inflation rate breached the central bank’s target band in September after supply bottlenecks, a weak cedi and surging energy costs propelled food-price growth to a seven-month high. , Bloomberg

(Bloomberg) -- Fitch Ratings cut Ghana’s longterm sovereign credit rating further into junk days after a similar decision by S&P Global Ratings.

Fitch downgraded Ghana by two notches to CCC, or eight levels below investment grade. The ratings company had lowered Ghana to B- in January, with a negative outlook.

Deteriorating economic conditions prompted the West African nation last month to seek an economic program from the International Monetary Fund of as much as $3 billion.

“The government’s high interest costs and structurally low revenue as a percentage of gross domestic product have increased the likelihood that IMF support would necessitate some form of debt treatment,” Fitch said in a statement Wednesday. “The high interest burden on local-currency debt also means that the inclusion of a domestic debt treatment cannot be ruled out.”

Read: Ghana Doubles IMF Funding Goal to $3 Billion in Three Years

The Fitch downgrade follows S&P’s decision last week to cut Ghana’s rating by one notch to CCC+. Moody’s Investors Service also lowered Ghana’s longterm debt one step deeper into junk territory to Caa1 on Feb. 4.

The premium investors demand to hold Ghana debt currently stands at 1,807 basis points over US Treasuries, according to JPMorgan Chase & Co. indexes, effectively locking the nation out of international capital markets. The yield on Ghana’s $1.25 billion Eurobond, maturing in 2032, was little changed at 20.4% as of 3 p.m. in the capital, Accra.