Ghana’s credit rating was slashed by two levels to CA, the second-lowest score at Moody’s, according to a statement on Tuesday. That puts Ghana on par with Sri Lanka, which is in default. The downgrade follows plans in Ghana’s proposed 2023 government budget to restructure both local and foreign debts.

“Given Ghana’s high government debt burden and the debt structure, it is likely there will be substantial losses on both categories of debt in order for the government to meaningfully improve debt sustainability,” analysts Lucie Villa and Marie Diron wrote in the statement. 

At the same time, Ghana’s outlook was changed to stable as the restructuring will likely happen in coordination with creditors and under a program with the International Monetary Fund, according to Moody’s.

The nation is expected to ask holders of its international bonds to accept losses of as much as 30% on the principal and forgo some interest payments as it hammers out a debt-sustainability plan to qualify for a loan from the IMF, Deputy Minister of Finance John Kumah said last week.

The West African country formed a committee last month to start talks with domestic bondholders to restructure its local-currency debt.

Ghana’s Eurobonds have been among the worst performers in emerging markets since Bloomberg reported the plans for the local debt recast in September, handing investors losses of almost 12% in that period, according to data compiled from a Bloomberg index.

The nation’s debt-exchange program will replace existing terms and exchange debts with longer tenors at cheaper rates, said Abena Osei Asare, a deputy minister of finance. The plans come after an analysis of debt sustainability showed the nation faces high risk of distress.

Fitch Ratings scores the nation at CC, two notches above default. S&P Global Ratings assigns it CCC+, seven levels into junk. BM/DM