It also reviewed the country's economic outlook as negative, reflecting “Ghana's limited commercial financing options, and constrained external and fiscal buffers.”
“Demand for foreign currency 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”.
Already, the local currency has seen a sharp depreciation in recent times. It's nearing ¢9 to one US dollar.
The CCC+ is the worst since 2003.
S&P added that Ghana has also been affected by a lack of access to the Eurobond markets.
“Local authorities have passed a levy on electronic transactions and legislation to tighten exemptions on tax payments including for VAT, among other moves.
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 pointed out.
S&P maintained Ghana's outlook at stable in February 2022
In February 2022, S&P affirmed Ghana's Long and short-term foreign and local currency ratings at B- and maintained the outlook at Stable.
It identified some constraints that prevented an upgrade of Ghana Sovereign ratings which included: the continuous uncertainty surrounding fiscal correction, including the delayed approval of the e-levy bill to give assurances to the 2022 budget.
Other concerns such as high-interest costs and greater dependence on domestic financing sources given the worsening external financing conditions facing Ghana were also highlighted.
Ghana seeks support from IMF
Ghana has already began discussions with the International Monetary Fund for economic support.
An economic programme is expected to be created in this regard to return the country into a stable territory.
A team from the Fund that visited the country in July 2022 said It will continue to monitor the challenging economic and social situation in Ghana closely in the coming weeks and engage authorities in the formulation of an Enhanced Domestic Programme that could be supported by a Fund arrangement.
“We reaffirm our commitment to support Ghana at this difficult time, consistent with the IMF's policies”.
Ghana will not default in Eurobond repayment
But, investment bank, IC Securities stated that Ghana will not default in its Eurobond repayment.
According to one of the leading investment firms in the country, a $750.0 million loan from the African Export-Import Bank, the $1.3 billion cocoa syndicated loan and the windfall from petroleum revenue will help shore up the country's reserves, and prevent any default.
The country has a $16 million out of the $1billion Eurobond issued on August 7th, 2012 to mature.
This is coming after it was initially issued with a principal amount of $750 million, due to reprofiling of some of the country's debt.