Fitch Ratings, an international ratings agency, has stated that it does not anticipate the country to receive financing guarantees from its bilateral creditors before the end of the second quarter.
The agency stated in a press release that while discussions have begun among some of Ghana's official creditors, the official creditor committee responsible for providing financing guarantees has not yet been established.
To secure the International Monetary Fund's (IMF) final approval for a $3 billion rescue package, the country needs financing assurances consisting of a combination of debt cancellation, reorganization, and commitments of additional strategic lending in order to stabilize the economy and restore growth.
However, in a statement announcing the downgrade of the country's local currency bond to 'RD' from 'CCC,' Fitch Ratings stated that the assurances should not be anticipated until June.
The government had hoped to secure the financing guarantee in May to pave the way for an agreement later in the month or at the beginning of June.
Commenting on the country's request for a bailout from the IMF, Fitch stated that the approval of the request would likely be contingent upon the government's ability to demonstrate a course toward reducing the present value of debt to 55% of gross domestic product (GDP) over the forecast horizon.
It stated that this would be based on the IMF/World Bank debt sustainability analysis (DSA) and the capacity of official bilateral creditors to provide financing assurances in the context of the government-requested Common Framework external debt restructuring.
"Although discussions have begun among some official creditors, the official creditor committee tasked with providing financing guarantees has not yet been formed.
"Fitch does not anticipate the provision of financing assurances, which would pave the way for IMF Board approval of the ECF arrangement and the publication of a new debt sustainability analysis, before the end of the second quarter of 23," the ratings agency said.
Default
In the meantime, Fitch Ratings reported that Ghana has defaulted on its domestic debt but has the potential to recover.
This week, the agency downgraded the country's local currency rating from 'CCC' to 'RD' due to the latest economic calamities.
Rating agencies use the 'RD' score for economies whose sovereigns have defaulted on debt payments but show signs of recovery.
Regarding the outlook, the report stated, "Fitch does not typically assign Outlooks to sovereigns with ratings of 'CCC+' or lower."
Basis
Following the conclusion of the domestic debt exchange program (DDEP), the government announced that holders of the swapped 'old bonds' would be paid their coupon and principals based on its fiscal capacity.
However, according to the ratings agency, this assurance has not been fulfilled, indicating that the country has failed to pay its debts.
Therefore, it was stated that the downgrade from 'CCC' to 'RD' was primarily due to the government's inability to make payments to holders of 'old bonds' and the absence of certainty regarding when payments would resume.
Ghana's counterparts
Another ratings agency, Standards and Poor's (S&P), had previously downgraded the local debt to the same 'RD' status, while Moody's has yet to issue its ratings.
The most recent development places Ghana behind only Zambia in Africa and fourth in the globe in terms of creditworthiness default.
Fitch stated in its statement that it has also downgraded five local currency bonds issued prior to the DDEP from 'CCC' to 'CC' and subsequently withdrawn their issue ratings.
It also affirmed the 'CCC' issue rating of local-currency bonds issued on the date of domestic debt exchange completion.
Absent remittances
Fitch added that missed payments on some of the local-currency bonds issued prior to the domestic debt exchange could impact one or more of the five previously rated bonds.
These five instruments have an ISIN number. GHGGOG044744, GHGGOG066150, GHGGOG043563, GHGGOG065475, GHGGOG044751.
It stated that despite the government's announcement that it would resume payments on local-currency bonds issued prior to the domestic debt exchange (the 'old bonds') on March 13, 2023 to bondholders who were either ineligible or did not participate in the domestic debt exchange, the government did not keep its word.
"The authorities later acknowledged that only coupon payments on the two-year note due on February 20, 2023, and the twenty-year note due in 2039 had been made. It stated that the principal payment on the previous note had not been made.
It was stated that 35 principal and coupon payments were due on the outstanding 'old bonds' between January 20 and April 20, 2023.