On Friday, S&P Global Ratings downgraded Ghana’s sovereign foreign and local currency ratings from B- to CCC+/C, further pushing the country’s debt into speculative territory.
S&P stated that it has a negative outlook for the nation; “reflecting Ghana’s limited commercial financing options, and constrained external and fiscal buffers.”
According to S&P, the Covid-19 pandemic and the Russian conflict have made Ghana’s fiscal and external imbalances worse.
The agency noted that a number of factors, including nonresident withdrawals from domestic government bond markets, dividend payments to overseas investors, and increasing prices for refined petroleum products, have increased demand for foreign currency.
According to the agency, the country has also been hampered by a lack of access to the markets for Eurobonds.
Among other things, local governments have approved laws to limit tax exemptions, notably for VAT, and to impose a fee on electronic transactions.
“While these changes could improve the tax take going forward, the situation remains challenging, and over the first half of 2022, the fiscal deficit has exceeded the government’s ambitious target,” S&P said.
In February, S&P had reaffirmed Ghana’s ratings after Moody’s had lowered the African country to Caa1 with a stable outlook.