The Government has come under harsh criticism from Doris Ahiate, a financial consultant and lead executive coach at Crescendo Consult Ltd., for going on a massive borrowing spree – leading to unsustainable debt levels and the need for a domestic debt restructuring scheme.
Speaking during an interview on Economic Governance Platform themed “Restructuring Of Domestic Bonds, Where Do We Go From Here,” Ahiate expressed her displeasure at the government’s misguided delusion that it could continue borrowing and easily repay the debts, likening it to a ponzi scheme.
Ahiate emphasized that the government had been spending well beyond its sustainable capacity, driven by the false notion that it could accumulate debt and effortlessly repay it. However, she argued that the world markets, which had previously encouraged Ghana to borrow, are now skeptical and concerned about the viability of the nation’s rising debt levels.
“It was more like a ponzi scheme we were running, but we have come to a point where the global markets that supported us with the borrowing have become wary and are mindful of the sustainability of the levels that our debts have accrued to, and are not willing to play ball anymore.”
Doris Ahiate
According to the financial expert, despite the nation’s participation in an International Monetary Fund (IMF) programme, the process of restructuring domestic debts is not yet finished, and she anticipates the government to carry out a second phase of restructuring due to opposition from external creditors.
She noted that external investors are reluctant to support Ghana through the restructuring process, indicating that the challenges are far from over.
Proposal To Restructure $2.7bn Pension Funds
Commenting on the government’s intention to to restructure approximately $2.7 billion in pension funds held by organized labor unions, Ahiate emphasized that in order to attain debt sustainability and avoid another round of restructuring, the government must rationalize its expenditure.
Failing to do so, she warned, would be akin to “plugging a deep hole with small grains.”
Ahiate’s critical assessment sheds light on the pressing need for the government to address its borrowing practices, reassess its spending habits, and strive for sustainable debt management to navigate the present economic challenges.
It can be recalled that in a recent development, organized labor unions vehemently rejected the new proposal aimed at restructuring the $2.7 billion pension funds under the Domestic Debt Exchange Program (DDEP).
The government’s memorandum of understanding (MoU) with organized labor, which initially exempted them from participating in the DDEP, has now come under scrutiny.
The exemption was intended to protect pension funds from potential losses and maintain the financial security of retirees. However, with the introduction of the new proposal, labor unions are concerned that this exemption may be rendered ineffective, thereby necessitating a reevaluation of the MoU.
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