Honorary Vice President of IMANI Africa, Bright Simons, has revealed that the government’s 85% participation rate in the domestic debt exchange programme does not reflect the reality of how much debt the government needs to treat in order to be able to service its debt in a sustainable manner.
According to him, while the government had at the beginning of the debt programme announced that it was trying to restructure 137.2 billion cedis, by 7th February when the deadline for the programme was coming to an end, the figure had been reduced to 130 billion cedis.
However, he indicated that after the deadline, when participation had been finalized, the government announced that the debt to be treated had been further reduced to 97 billion cedis.
Mr Simmons stated that these are “gimmicks in a way and it’s nice to tell a good story”, although it’s true that this government has hit 85%. Nonetheless, he explained that the truth of the matter is that that was only because “we reduced the total amount of bonds that you claim you now need to fix or you’re able to fix which is called the eligible debt”.
He noted that while the 85% paints a good picture for the government’s programme, the drastic reduction in the debt base to be treated poses a big problem.
“The reason why that is important to the whole purpose of that exercise is because we can’t pay the debt. So, if you’re only treating a small percentage of the problem then the bigger problem remains. So, that is the key issue at stake. That 85% participation rate, it’s a good-looking number but it doesn’t reflect the reality of how much debt the government felt at the end of the programme, not at the beginning. At the end of the programme on 7th February, [it] was critical to be treated in order for the government to be able to continue to service its debt. That’s the argument that we are making.”Bright Simmons
Ghana’s domestic debt
Meanwhile, an Economist and Professor of Finance at the University of Ghana, Godfred Bokpin, has expressed his misgivings about the possibility of Ghana achieving the debt sustainability cut off of 55% by 2028.
According to him, it is impossible to achieve the target given the present value terms. He explained that even the International Monetary Fund (IMF) ought to know that the country cannot achieve the target given the government’s approach regarding the Domestic Debt Exchange Programme.
Prof Bokpin noted that the underpinnings of the exchange progamme could be detrimental to the growth of the economy in the long term.
“There is no way Ghana can achieve the debt sustainability cut off of 55% in present value terms by 2028. It’s impossible – we cannot. Let’s not deceive ourselves. I will not put the blame solely on government. I think the IMF itself ought to contextualize their framework that by 2028, that would be too difficult for us, especially given the approach that government has adopted.”Prof Godfred Bokpin
Prof Bokpin revealed that in the wake of the debt exchange programme, individual bondholders could not negotiate from a position of strength due to government keeping a lot of information to itself. This, he highlighted, dwindled the confidence of the participants in the programme.
Prof Bokpin highlighted that government needs to present a “comprehensive picture” as the programme concludes. He underscored that rather than resorting to a debt exchange programme, the country would gain debt sustainability faster should government heed calls for fiscal adjustment “heavily built on expenditure cut”.
Elaborating further, Prof. Bokpin argued that many of government’s agencies with some created since 2017 have no value to remain in existence. He explained that these agencies were draining the country financially.