Global Ratings agency S&P has downgraded Ghana’s credit ratings to default after the government suspended debt payments, a move that complicates the planned debt restructuring meant to unlock a bailout by the International Monetary Fund.

Ghana, which has $13 billion of foreign bonds, was downgraded to selective default from CC due to the moratorium on debt payments, the credit assessor said in a Tuesday statement. The default comes as Ghana suffers from “very low net reserves, a volatile exchange rate, high inflation and a weakened economy,” according to analysts Frank Gill and Ravi Bhatia.

“These factors have all limited the sovereign’s capacity to refinance its maturing debt,” the S&P analysts wrote. “We could raise the long-term ratings following the presentation of restructurings and their acceptance by creditors.”

Ghana caught investors by surprise earlier this week by announcing it would cease payments on its foreign bonds, commercial loans and most bilateral obligations pending an agreement with creditors. While plans for a broad restructuring of foreign and local debt had already been signaled, some expected the government to keep making payments in the interim.

S&P is the first major rating company to declare Ghana’s foreign debt in default. Fitch Ratings and Moody’s Investors Service assign it the second-lowest rating. The Trade Association for the Emerging Markets said Monday the notes should trade flat.

A group of Ghana’s foreign bondholders — including Abrdn, Amundi, BlackRock and Greylock — have already organized to form a creditor committee ahead of debt restructuring negotiations.

Ghana’s bonds due in 2032 extended declines Tuesday, falling half a cent to 32 cents on the dollar, the lowest since late November.

The country’s local-currency debt score was slashed to default by S&P earlier this month after the government announced a voluntary domestic debt-exchange program that involved interest losses for holders.

Source: Bloomberg