Ghana had its credit rating cut by Moody’s Investors Service after government sounded a warning that tumbling oil prices will worsen its budget deficit.
The sovereign’s foreign-currency rating was lowered one step to B3, six levels below investment grade, Moody’s said Thursday. The outlook on the grade is negative. Standard and Poor’s assesses Ghana at an equivalent B-, while Fitch Ratings has it one grade higher, at B.
The move was the second downgrade by Moody’s in less than a year. Ghana is seeking a $1 billion loan from the International Monetary Fund. The second-biggest economy in West Africa is struggling to rein in inflation and grappling with a sliding currency that is the continent’s worst performer so far this year.
“The negative outlook reflects further downside risk to the country’s debt dynamics and liquidity pressure in the short-term if the country’s policies fail to successfully contain its fiscal deficit, stabilize its currency and address current impediments to higher economic growth,” Moody’s said.
The IMF has pledged to help bolster Ghana’s currency, the cedi, on condition the government reduces spending on salaries of civil servants.
Finance Minister Seth Terkper said in a speech to parliament last week the budget deficit will be wider than previously projected because a decline in crude prices has hurt revenue.
The target for this year is 7.5 percent of gross domestic product, instead of 6.5 percent forecast in November, Terkper told lawmakers. Ghana became an oil exporter in 2010.
The government doesn’t have money to fuel power plants, which since December has led to planned power outages that last as long as 24 hours in the capital, Accra. Inflation accelerated to 16.5 percent in February.