There is always some level of security being financially independent comes with.
It is rightly so because it comes along with some level of freedom to move and take decisions at will, and this cannot be achieved when one is saddled with back-breaking debt hoping to find an escape.
To wit, ‘neither a borrower or a lender be’, because being any puts one in both a financial bind and the tendency also to have strained relationships if the former fails to deliver on his word to pay off his debt.
The ‘art’ of begging has been mastered by the Africa continent, as countries are one way or the other struggling to pay off debt to creditors, and when they fail to do so, they have had to ‘will’ off some of their prized resources to offset such debt.
Developing countries owe Chinese lenders at least $1.1 trillion, according to a new data analysis which says more than half of the thousands of loans China has doled out over two decades are due as many borrowers struggle financially.
Overdue loan repayments to Chinese lenders are soaring, according to AidData, a university research lab at William & Mary in Virginia, which found that nearly 80% of China’s lending portfolio in the developing world is currently supporting countries in financial distress.
For years, Beijing marshalled its finances toward funding infrastructure across poorer countries – including under an effort that Chinese leader Xi Jinping branded as his flagship ‘Belt and Road Initiative’, which launched a decade ago this fall.
Ghana, isn’t debt-free when it comes to debt and its ability to clinch a deal to move forward IMF’s disbursement of the second tranche of money is highly dependent on how well it negotiates with one of its key creditors – China.
As it stands, IMF has revised its board’s meeting date on Ghana’s programme review and the second tranche disbursement to the first week in December. This new date has caused some stir, with many people questioning its implications on Ghana’s economy.
For one thing, it’s very clear that government and all players within the Ghanaian economy were expecting that this $600 million will come to strengthen the success that have been chalked for the first part of implementation of the programme.
An economist, Prof John Gatsi, revealed that “a delay will derail the performance of the currency, will actually knock down the building of reserve for the country and that will have a reflection on the way the currency performs”.
He indicated that a delay into first half of December will mean that there will be a dire consequence for the currency’s performance.
Addressing debt levels with China
At this moment, Ghana cannot afford to be in an economic stalemate as the thriving of the economic and the “economic turnaround” it is experiencing must be maintained or improved to get the country out of the financial ‘woods’.
In its bid to engage in debt restructuring, government is reminded once again that there are two parties involved- a debtor and a creditor, and the debtor is the one actually asking for some reliefs and consideration, and that should be the approach.
However, if government fails to recognize that fact, Prof Gatsi contends that what the debtor is proposing does not meet the expectation of the creditor, which poses significant problems.
“For example, we’re talking about 30-40 percent haircut – that proposal from the debtor, does it give comfort to the creditor that he’s engaged in something worthwhile? So, that is the issue, whether what the debtor is proposing is realistic in the eye of the creditor or not. So, that will also cause some kind consultations that will cause the delay that we’re talking about. So, it’s very clear that what we are proposing – the two parties have not yet accepted the proposal that is why there’s a delay.”
Prof John Gatsi
Meanwhile, whatever government has achieved now does not matter so much, what matters now is getting an agreement or a letter of comfort. If the IMF decides that it wants to waive this condition that they have set, and it is not done, this will be lingering on, and cause postponement from time to time until finally when an agreement is settled at a point in time.
However, when this delay continues, it also sparks uncertainty, and that uncertainty will be seen in economic indicators, which Ghana doesn’t need to experience going into the new year.
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