Moody's Investors Service downgraded Ghana's sovereign rating and put the country on a negative outlook to reflect an increasing debt burden, large fiscal imbalances and a sharp weakening of the cedi currency.
The downgrade from by one notch to B3 from B2 comes despite an agreement with the International Monetary Fund in February for a three-year $940 million financial assistance programme designed to restore fiscal stability.
It is a further blow to the economic reputation of the West African country, which for years saw strong growth rates due to its exports of gold, cocoa and oil but faces a raft of macroeconomic problems.
These include inflation that stood at 16.5 per cent in February, a currency that has fallen 9 per cent this year after a 31-per cent fall in 2014 and a fiscal deficit the government says will decline to 7.5 per cent by the end of the year.
"The first driver of the downgrade is Ghana's deteriorating fiscal strength as reflected in the significant increase in the government debt ratio to an estimated 67.2 percent of GDP in 2014 from 54.8 per cent in 2013," Moody's said in a statement.
"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, stabilise its currency and address current impediments to higher economic growth," it said on Thursday.
The government of President John Mahama says Ghana has strong medium-term prospects in part due to an expected increase in oil and gas production in the next three years and says its policies backed by the IMF will restore macroeconomic stability.